In a recent press release, the South African Revenue Service (SARS) has announced a series of form and system changes for the Trust Filing Season of 2023. These changes are expected to provide taxpayers with the clarity and certainty they require to meet their tax obligations, making it easier for them to comply.
The filing period for Trusts that are non-provisional taxpayers will open on 7 July and close on 24 October 2023. For Trusts registered for provisional tax, the filing period will commence from 7 July 2023 and conclude on 24 January 2024. Additionally, the beneficiaries and donors of a Trust must declare their income that was vested in a beneficiary by the Trust during the year of assessment in their income tax returns.
System Enhancements and New Requirements
From 23 June 2023, SARS will introduce changes to the Income Tax Return for Trusts (ITR12T), eFiling enhancements, and mandatory supporting documents that must accompany the return. The changes include updates to the wizard on the Trust return, additional questions to determine if any Local or Foreign amount(s) were vested in the Trust as a beneficiary of another Trust or deemed to have accrued in terms of s7 during this year of assessment, and the number of Trusts from where these amounts were received.
A simplified return for Passive Trusts is also being introduced to provide for a less cumbersome return, where limited Trust specific activities occurred during the year of assessment. 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 (Income Tax Return Wizard).
Enhancements to the Trust Return (ITR12T)
The Trust Return (ITR12T) will see the addition of a new field for credit agreements and debtors’ allowance “Lay Byes” (S24) under both sides of Special Allowances not claimed in the Income Statement and Allowances/Deductions. A Beneficial Ownership Declaration page will be added to record all beneficial owners and those who may gain financially from the proceeds of the Taxpayer.
Based on the wizard question above (relating to distributions received from other Trusts), the required number of containers for these distributions will be opened in the return. This will allow taxpayers to provide the detail of the distributions received from other Trusts into the individual containers.
Supporting Documents and eFiling Enhancements
All mandatory supporting documents must be uploaded and submitted with the Trust return. This includes, amongst others, the Trust instrument, Annual Financial Statements, and resolutions/minutes of trustee meetings. The requirements will vary according to the Trust type.
Enhancements to eFiling include a pop-up notification when the return type is selected. Should the taxpayer select an incorrect tax type based on their registration, this pop-up notification will alert the taxpayer to select the correct return.
Managing Tax Compliance Matters
Trusts are included in the definition of a “person” in terms of the Income Tax Act, 1962 (ITA), and as such, the representative taxpayer (trustee/s) has a responsibility to register all Trusts for income tax purposes. The representative taxpayer (the trustee/s of a Trust) or the appointed tax practitioner MUST file an income tax return for the Trust on an annual basis in terms of the annual notice and during the Trust return filing period.
SARS has made it easier for taxpayers by allowing them to obtain and file a Trust Return (ITR12T) by registering as an eFiler on SARS eFiling, request the return, and then customise it by completing the questions on the first page(wizard) of the return. To register a new Trust for income tax and submit supporting documents, taxpayers can use the online platforms on the SARS website.
Implications for Trusts
These changes are expected to have far-reaching implications for Trusts in South Africa. The introduction of a simplified return for Passive Trusts, for instance, is likely to streamline the filing process for Trusts with limited specific activities during the year of assessment. The new field for credit agreements and debtors’ allowance “Lay Byes” (S24) will provide more clarity on Special Allowances not claimed in the Income Statement and Allowances/Deductions.
The requirement for all Trusts to submit a Trust return underscores the importance of compliance. The representative taxpayers of Trusts (trustees) are urged to ensure compliance in this regard. The introduction of mandatory supporting documents that must accompany the return will also enhance transparency and accountability.
The South African Revenue Service’s changes to the Trust Filing Season for 2023 are aimed at improving service offerings, systems, and processes related to the filing of income tax returns for Trusts. By providing taxpayers with more clarity and certainty, these changes are expected to make it easier for them to meet their tax obligations. As the filing season approaches, Trusts are encouraged to familiarise themselves with these changes and prepare accordingly.