Changes To The Trusts Property Control Act
Beneficial-ownership disclosures required
South Africa introduced new rules, effective from 1 April 2023, on requirements to disclose the beneficial ownership of assets. These measures were introduced in a new section (11A) in the Trust Property Control Act (TPCA).
What is a beneficial owner?
The new definition of a beneficial owner covers the following persons:
- a natural person who directly or indirectly ultimately owns the relevant trust property.
- a natural person who exercises effective control of the administration of the trust arrangements that are established pursuant to a trust instrument.
- each founder of the trust.
- each trustee of the trust.
- each beneficiary referred to by name in the trust instrument or other founding instrument in terms of which the trust is created.
If any of these happen to be a legal person, then it is also required of the trustee to establish who the natural person or persons happen to be who are in effective control, or who are the owners of such an entity which qualifies as a beneficial owner.
The definition of ‘beneficial owner’ includes the founder of the trust, all trustees of the trust, and all beneficiaries mentioned by name in the trust.
Who should maintain a register of beneficial ownership?
In terms of Section 11A(1) of the TPCA states that a trustee must:
- 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 with the Master’s Office a register of the prescribed information on the beneficial owners of the trust.
- Ensure that the above information is kept up to date.
Information required from the beneficial owners includes:
- full name,
- date of birth,
- official identity document number or passport number,
- residential address,
- other means of contact,
- the grounds on which the person is a beneficial owner of the trust,
- date on which the person became a beneficial owner, and
- date on which the person ceased to be a beneficial owner.
What should trustees be doing now?
It is clear that trustees should be taking the necessary steps to gather the required information so as to maintain the relevant register of beneficial owners, as well as the record of accountable institutions. They must further ensure that this information is kept up to date, and when required by the legislation, submit the details to the Master’s Office.
A trustee who fails to comply with the obligations outlined in the Regulations could, upon conviction, be liable for a fine not exceeding R10m or imprisonment not exceeding five years, or both.
SARS can access the beneficial ownership information that must be disclosed under section 11A of the TPCA.
Changes to the Income Tax Return for Trusts (IT12T)
With effect from 23 June 2023, SARS introduce changes to the Income Tax Return for Trusts (ITR12T)
Distributions received from a Trust:
Additional questions added to the Income Tax Return Wizard to determine if any local or foreign amount(s) were vested in the trust as a beneficiary of another trust; and the number of the trusts from where these amounts were received.
Return for Passive Trusts
The wizard and guide will provide guidance in this regard. The taxpayer must ensure that the correct “type” of return is selected on the first page of the tax return.
Information on donors/funders of the Trust
Additional questions added to the Income Tax Return Wizard to determine if amounts were deemed to have accrued to a donor/funder in terms of Section 7 during the relevant year of assessment. Donors and funders must declare trust income and capital gains attributed to them.
Beneficial Ownership Declaration
Beneficial owners and those who may gain financially from the proceeds of the trust need to be reported.
Supporting documents to be submitted with the ITR12T
All mandatory supporting documents must be uploaded and submitted with the Trust tax return. This including the Trust instrument, Annual Financial Statements, Letters of Authority and resolutions/minutes of trustee meetings. The requirements will vary according to the Trust type.
Trustees become third-party data providers to SARS – IT3(t)
SARS has implemented its own new requirements.
Trustees will need to submit to SARS an IT3(t) form for each trust. Submission of the IT3(t) form is required in addition to the current Trust Tax Return and will actually need to be completed before the annual Trust Income Tax Return is submitted (ITR12T).
The IT3(t), will be due on the 31 May of each year in which the trusts tax year ends.
From 2024 – compulsory for all to submit an IT3(t) form by 31 May 2024.
The IT3(t) requires all the demographic details of the trustees and the beneficiaries (including ID number, passport number, address and contact details), details relating to all financial flows including loans, donations, capital and income distributions.
NB – this information will have to balance back to the new IT3(t)’s which trustees have to submit annually to SARS, based on distributions made to beneficiaries.
Some confusion remains regarding whether SARS would expect a discretionary beneficiary who has never received any distributions to be declared as a beneficiary. This has been bought to SARS’s attention by various tax advisors and we await clarity on the matter.
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Kindly note this article is intended for general information purposes only and does not constitute accounting, tax, nor regulatory related advice. Should you need advice, please contact one of our practitioners.