Are you a trustee of a resident trust in South Africa? Brace yourself for significant changes as SARS now demands that trustees become third-party data providers. In this blog, we’ll dive into the increased reporting requirements, explore potential challenges, and offer expert advice on navigating this new landscape to ensure compliance and transparency.

Understanding the increased reporting requirements for trustees

As a trustee, you play a crucial role in managing the affairs of a trust, but recent changes by SARS now extend your responsibility to acting as a third-party data provider, similar to banks and insurance companies. These changes come as SARS aims to tackle noncompliance issues related to trust registrations, tax return submissions, and disclosures. 

The IT3(t) form: a key reporting tool for trustees

Beginning in September 2023, trustees must submit an IT3(t) form for each trust in addition to the current Trust Return Process. The IT3(t) form requires comprehensive information, including demographic details of trustees and beneficiaries, financial flows, loans, donations, and distributions.

The challenge lies in gathering accurate information for distributions, which may only be finalised after the trust’s financial statements are completed. For instance, a dividend income distribution might be decided before the trust’s year-end, but the actual values may be determined later. This timing discrepancy could impact the income tax returns of individual beneficiaries.

Navigating uncertainties and seeking clarity

Some uncertainty remains regarding whether discretionary beneficiaries who haven’t received any distributions must be declared. This issue has been raised by tax advisors, and we await further clarification from SARS.

Strict deadlines and reporting guidelines

Trustees, as representative taxpayers for trusts, are required to electronically submit information to SARS within seven months after the trust’s year-end and must follow filing guidelines based on the number of records. 

Adapting to the burdensome reporting requirements

As trustees, it’s essential to prepare for the increased administrative burden imposed by the new reporting requirements. Familiarise yourself with the 272-page business requirement specification (BRS) document published by SARS, which outlines the IT3(t) data submission process in detail.

Meeting your obligations as a trustee

Becoming a third-party data provider to SARS may seem daunting, but with the right approach, you can fulfil your obligations effectively. Stay informed about the latest updates from SARS, seek professional advice when necessary, and make sure to meet the reporting deadlines. By embracing these changes, trustees can play a vital role in maintaining transparency and compliance within the South African tax system.