Trustees to start preparing for third-party data (IT3(t)) submission to Sars

SINCE 2023, the South African Revenue Service (Sars) has categorised trustees as third-party data submitters alongside banks and other financial institutions, which are required to report their figures to Sars so that Sars can pre-fill this information in the relevant persons’ tax returns, aiming to prevent tax leakage.

- PHIA VAN DER SPUY

This has had a substantial impact on how trustees manage trusts and on various individuals involved with trusts, such as donors, funders, and beneficiaries.

Why third-party data?

Sars explains on their website that third-party data is required for various purposes in administering the Income Tax Act, such as but not limited to verifying whether a person has filed or provided the correct information in their tax returns, ensuring that the information or documents comply with the provisions of relevant tax legislation, and determining a person’s tax liability.

Whose responsibility is it?

Sars made trustees liable for submitting the IT3(t)s. While trustees can use trust service providers, they remain ultimately responsible. Earlier this year, Sars emphasised that trustees have personal legal liability for their trusts’ tax obligations, even if they use a tax practitioner. The comment was made that “Sars will hold all the trustees of a trust jointly and individually liable for their trust’s tax compliance.”

Who is affected?

Focusing on amounts vested in beneficiaries, Sars initially announced in the Government Gazette on June 30, 2023, that “resident” trusts and nonresident trusts required to submit annual income tax returns, excluding “Collective Investment Schemes” and Employment Share Incentive Scheme Trusts, must submit IT3(t)s. Although the Business Requirements Specification: IT3 Data Submission states that null returns are needed if no distributions or vestings occurred, Sars exempted the submission of null returns in the first test year in 2024. Starting this year, trustees must submit null returns if no distributions were made, and include all named beneficiaries on the IT3(t), excluding beneficiaries in classes who have previously received distributions or vestings.

Which amounts are to be included?