Amendments to the Trust Property Control Act and new reporting requirements introduced by SARS to enhance transparency, reporting and compliance and to comply with recommendations from the Financial Action Task Force (FATF) to eventually get South Africa off the grey list, mean an onerous and huge burden on trustees.
Firstly, trustees have to collect, retain and maintain information on all beneficial owners of the trust. “Beneficial owner” has been defined to include the founder of the trust, all trustees of the trust, as well as all beneficiaries named in the trust deed and beneficiaries who have received or accepted benefits from the trust. Other than natural persons, for legal persons such as companies, the natural persons who effectively control or own the entity have to be included. This information has to be kept in a register by each trustee and reported onto an online facility at the Master of the High Court from 1 April 2023. To date, it is unclear how the practical reporting to the Master’s Office will happen and in what format, but every trustee should make sure that they have the register in place by the end of this coming Friday.
Secondly, trustees will be required to report to SARS on the above information. A new tax return for trusts on which details of the founder, each trustee, each beneficiary and the donor, and a representative of a trustee have to be disclosed to SARS. Some other questions asked on the new trust tax return would have to be answered very carefully, as the answers may have unforeseen negative consequences for the trust and trustees. When new trusts are registered with SARS, a host of new disclosure requirements have to be complied with.
Thirdly, trustees will have to do third-party declarations to SARS from September 2023. SARS requires this information at present from banks, financial institutions, medical schemes, attorneys and estate agents, and then pre-populates this information on taxpayers’ annual income tax returns.
It is clear from the above that, due to the additional administrative burden, independent trustees will most probably increase their professional fees in line with the additional time and responsibility that the above will require of them, and also that smaller trusts will most probably be terminated as the administrative burden and costs would no longer be worthwhile.
Contact the Fidelis Vox team should you require professional assistance with complying with new legislation.
This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)