April Tax Alert
Cry the beloved trustees
Impact of Grey Listing
South Africa’s recent Grey Listing by the global financial watchdog, Financial Action Task Force (FATF), has forced government to introduce new measures to ensure the country improves its image in combating money laundering and financial crimes. To this end, amendments were made to the Trust Property Control Act, which require trustees to:
- establish and record the beneficial ownership of the trust;
- keep a record of the prescribed information relating to the beneficial owners of the trust;
- lodge a register of the prescribed information on the beneficial owners of the trust with the Master’s Office; and
- ensure that the prescribed information referred to above is kept up to date.
Beneficial owner transparency is one of the measures used to combat financial crimes, including tax evasion. The above changes came into effect on 1 April 2023.
Here is the kicker, beloved trustees, failure to comply with the above obligations is an offence and on conviction is liable to a fine not exceeding R10 million, or imprisonment for a period of five years or both.
Stricter SARS timelines
Trustees need to make a determination by way of a signed resolution before the end of February as to the amount of the trust’s taxable income vested in beneficiaries. Whilst this has always been the position, it is something that SARS is looking at more closely. Should there not be evidence that this was done before the end of February, the trust will be taxed on the income at the higher tax rate.
It has been the practice of SARS to allow trusts 11 months to finalise their financial statements and submit tax returns, assumably on the false presumption that they were provisional taxpayers. Since the qualifications for provisional taxpayers were very strict last year, several trusts were not considered provisional taxpayers and had only eight months to submit their returns. Failure to do so has resulted in administrative penalties.
SARS recently issued a draft notice, that require trustees to submit an IT3(t) which provides details of any amount vested in a beneficiary including income (net of expenditure), capital gains and capital amounts distributed by the end of September so that beneficiary’s tax returns can be pre-populated (similar to IRP5s and IT3(b)s). The first proposed submission date is 30 September 2023.
Whilst we, along with various other stakeholders, are in the process of submitting comments regarding our concerns on the above timeline to delay the implementation of this, the reality is that very soon, your trust will require an enhanced level of administration.
From the above it is clear that trustees will have to be more diligent and actively involved in trust administration in order comply with the more onerous obligations including those imposed by SARS.
Similarly, an IT3(d) will need to be issued by certain Charitable Institutions (approved PBOs that issue section 18A certificates) in respect of donations received in order for this to also be pre-populated on the tax return. This is however proposed to apply from the 2024 tax year.
For the 2024 tax year, installers of solar photovoltaic (PV) at a residence for domestic purposes will also have a requirement to submit third party data.
Author: Deon van Zyl
Director, PKF Port Elizabeth