Directors’ meetings and requirements
March 2, 2016
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March 2, 2016

Trusts and the registration for income tax of beneficiaries

With a clear increased focus on the taxation of trusts, the South African Revenue Service (SARS) expanded the income tax return from the 2014 tax season, where much more information was required. Many of those fields were not mandatory until the 2015 tax year. The administrative burden has therefore increased quite significantly in terms of the information required to be captured on the returns.

It has, among other requirements, become mandatory to provide information of persons who had dealings with a trust during the tax year. Information such as beneficiaries who received distributions from the trust (both income and capital distributions), persons who have loan accounts with the trust (both debit and credit loans), and even persons who enjoyed the use of the trust’s assets – to name a few -is required to be provided on the return.

The practical problem that these mandatory fields has created is that the income tax reference number of a person dealing with a trust is required when inserting the information of that person, and since many beneficiaries of trusts are not yet registered for income tax, it is not possible to submit the income tax return.

Fortunately SARS have devised a practical work-around for this situation and have stated in their Comprehensive Guide to the Income Tax Returns for Trusts that, where a person whose details are to be captured on the income tax return of a trust, is not registered for income tax, the income tax field for such person/beneficiary should be completed as zeros.

It is therefore not compulsory to register a person for income tax solely on the basis that he/she is a person who has dealings with a trust or is a beneficiary of a trust, as long as that person is not liable for income tax (for example a minor child who received income that is not more than the threshold).

We do, however, advise that one should not refrain from registering an individual if that person is liable to pay tax. SARS now has the information of distributions made from trusts and can easily conduct investigations based on such information.

Should you have any questions with regard to the contents of this article, you are welcome to contact Jaco van Straaten on 021 840 1600 or jaco@asl.co.za.