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Changes to the Trust Landscape

2025 Insights 2 min read

Michelle Hawkins, Senior Tax Specialist, PKF Octagon

The trust landscape in South Africa has undergone significant changes in recent years, particularly from a tax and compliance perspective, driven by both domestic reforms and international pressure. We look at some of the key developments.

No. Issue What is required Tax implication
1. Restriction of the Conduit Pipe Principle

Historically, trusts could distribute income and capital gains to non-resident beneficiaries, who would then be taxed at their own marginal rates. This was based on the conduit pipe principle, which allowed income to retain its nature when passed through a trust.

Effective 1 March 2024, this principle is now limited to South African resident beneficiaries only.

 For non-residents, income and capital gains are taxed in the hands of the trust at the applicable trust rates (e.g., 45% for income, 36% for capital gains).
2. Enhanced Beneficial Ownership Disclosure

In response to the Financial Action Task Force (FATF) and global anti-money laundering standards, South Africa amended the Trust Property Control Act via the General Laws Amendment Act (effective April 2023).

Trustees are now required to:

  • Identify and record all beneficial owners of the trust.
  • Maintain up-to-date records and lodge them with the Master of the High Court.
  • Disclose trust involvement in transactions with accountable institutions.
 Non-compliance can result in fines up to R10 million or imprisonment.
3. Foreign Tax Credits

From 1 March 2025, trusts may claim foreign tax credits on income or capital gains earned abroad. These credits:

  • Must not exceed the portion of South African tax related to that income.
  • Can be carried forward for up to six years if unused.
 Claim foreign tax credits subject to the above limitations.
4. Expanded Definition of a Trust

The statutory definition of a trust now includes:

  • Portfolios of collective investment schemes
  • Portfolios of hedge fund collective investment schemes
 This broadens the scope of entities subject to trust tax rules.
5. Filing Requirements and Deadlines

SARS has tightened compliance around trust tax returns:

  • All trusts, even dormant ones, must file ITR12T annually.
  • Third-party data returns (IT3(t)) must be submitted for amounts vested to beneficiaries.
  • Trustees must submit supporting documents like trust deeds, financial statements, and beneficial ownership organograms.
 Late payment penalties and interest apply on late submissions.
6. Section 7C Anti-Avoidance Measures

SARS continues to scrutinize low/interest-free loans to trusts or related companies. Section 7C of the Income Tax Act:

  • Triggers donations tax on such arrangements – the difference between the interest charged and the official SARS rate is treated as a deemed donation. The donation is deemed to occur on the last day of the trust’s year of assessment (usually 28/29 February).
  • Applies even when loans are made to companies controlled by trusts or their beneficiaries.
 This deemed donation is subject to Donations Tax (typically 20%, or 25% for amounts exceeding R30 million).
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