Trust tax deadline: Penalties for late filers 

Today (Monday, 19 January) is the last day for trustees and tax practitioners to file the annual tax returns for trusts. Missing the deadline this year will undoubtedly lead to penalties and interest.

The South African Revenue Service (Sars) has been lenient in the past, giving warnings and some discretionary penalties when returns were filed late. However, this year, fixed administrative penalties will apply from February for non-compliance.

Phia van der Spuy, founder of Trusteeze, says very few trusts are compliant. She quoted statistics from 2024 when only around 84 000 trusts submitted their returns, notably up from 80 000 the prior year.

Read: Tax frustration spills out into the open …

Van der Spuy says that around 15 years ago, it was estimated that there were close to one million trusts in South Africa. With the tightening of the regulatory framework due to SA landing on the Financial Action Task Force’s (FATF) grey list, the Master of the High Court’s offices have been cleaning up their records.

No central database

Recent estimates indicate that there are around 610 000 inter vivos trusts in SA, Van der Spuy said during a webinar on Friday unpacking the 2026 trust landscape.

Read:
Tax frustration spills out into the open …
Faster audits, but a tougher Sars
Sars set to draw the line on persistent trust non-compliance, finally

The country still does not have a central database for trusts, even though this was one of the requirements for SA to be removed from the grey list. Nonetheless, the country made it off the list at the end of last year.

It appears that not all trusts are registered with Sars as is required by law. This applies to resident and non-resident trusts, active and passive trusts and trusts with or without income or transactions.

A figure of only 400 000 Sars-registered trusts is being bandied about.

Read: Faster audits, but a tougher Sars

When a trust is registered, it must submit supporting documents, including the trust deed, letters of authority from the Master of the High Court confirming trustee appointments, identification documents for trustees and beneficiaries, and proof of address for the trust and trustees.

Failure to register a trust with Sars is a breach of the Tax Administration Act. Sars requires all registered trusts to file an annual income tax return (ITR12T). On its website, Sars notes that trustees are responsible for ensuring compliance, even if the trust has no income.

Complicated process

Filing these returns cannot be left until the last moment. It has become a complicated process over the years. Trustees are required to submit resolutions for each transaction, along with other supporting documents, such as meeting minutes.

Van der Spuy warns trustees not to backdate any of these documents as Sars is using AI to spot anomalies in wording and even font types.

Trustees can be held personally liable for non-compliance. Beneficiaries may also face tax consequences if distributions are not correctly reported.

Trustees must educate their clients about trust distributions. They should not make distributions without a mandate and a resolution authorising them to do so.

There is a potential gap of R58 billion between the distributions made by trusts and the amounts declared by beneficiaries on their tax returns.

Sars is busy building a puzzle between the third-party data returns of trusts (IT3(t)s) and the returns submitted by the trust, its founders and beneficiaries. “It is becoming really interesting,” says Van der Spuy.

Read: Sars set to finally draw the line on persistent trust non-compliance

The IT3(t) form is a new reporting requirement introduced by Sars in 2024. Trustees are now required to report all distributions made to beneficiaries using this form. This includes any income, capital gains, or capital amounts vested in a beneficiary during the tax year.

Again, compliance with this requirement is staggeringly low. Only 20 000 IT3(t)s were submitted in 2024 and 35 000 last year.

Continued scrutiny

Trust scrutiny by Sars and the Financial Intelligence Centre is going to remain. The FIC states that only half the battle was won when SA was removed from the FATF grey list. Efforts to enhance its abilities to fight financial crimes will continue.

Van der Spuy points out that SA has already begun preparing for the fifth round of the mutual evaluation, scheduled to take place from the first half of 2026 to October 2027.

There is no room for complacency.

She says trustees and tax practitioners must regularly update trust information. Monitoring the trust’s affairs cannot be a once-off event. It must be part of their business processes, costing structures, and client education programmes.

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