Trusts and PBO’s to be subject to further tax filing requirements

Additional filing requirements subjecting trusts to third-party reporting have been in the pipeline for a while. These requirements were somewhat clarified in a draft notice (Returns of information to be submitted by third parties in terms of section 26 of the Tax Administration Act) issued by SARS on 29 March 2023.

Once finalised, the draft notice will replace Notice 241 issued by SARS on 23 March 2018 which already requires certain persons to submit third-party returns, including inter alia banks, financial institutions, listed companies, medical schemes, estate agents, and attorneys practicing for their own account, persons liable to pay withholding tax on interest and issuers of tax-free investments.

A third-party return is essentially where SARS requires a person who employs, pays amounts to, receives amounts on behalf of, or otherwise transacts with another person, or has control over assets of another person, to submit a return by a date specified in a public notice.

The draft notice proposes maintaining the requirements applicable to the categories of persons already covered by the notice, with three notable additions:

  • Trusts that are resident as defined in the Income Tax Act;
  • Public benefit organisations (PBOs) that issue section 18A receipts; and
  • Persons who issue solar installation compliance certificates.

If the draft notice is finalised in its current form, trustees of all South African tax resident trusts will be required to issue an IT3(t) form (or data compiled in accordance with SARS’ Business Requirement Specification: IT3 Data Submission) in respect of any amount vested in a beneficiary, including income (net of expenditure), capital gains and capital amounts distributed. This requirement will apply to 2023 and all following years.

On the other hand, PBOs will be required to issue an IT3(d) form (or data compiled in accordance with SARS’ BRS: IT3 Data Submission) containing information concerning any amount donated where a section 18A receipt was issued and information concerning the donor. PBOs will be subject to bi-annual submissions in the future, although special transitional rules will apply to PBOs that will be submitting third-party returns for the first time.

SARS’ BRS: IT3 Data Submission, updated on 7 October 2022, previously indicated that the following categories of information would be required in an IT3(t) submission by trusts (as further detailed in the BRS document):

  • Demographic information of the reporting Trust;
  • Demographic information of Trust Persons/Beneficiaries;
  • Taxable amounts distributed/vested in Persons/Beneficiaries;
  • Details of non-taxable income distributed; and
  • Trust financial flow.

The first expected due date for the IT3(t) submission by trusts is 30 September 2023 covering information for the period from 1 March 2022 to 28 February 2023. However, it remains to be seen whether the draft notice will be finalised in its current form following public comment thereon which was due on 14 April 2023, and how this may impact SARS’ detailed BRS document.

Trustees and PBOs should be mindful of the upcoming reporting requirements and consult their advisors where necessary.

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