The implementation of the General Laws (Anti-Money Laundering and Combating Terrorism Financing) Amendment Act 22 of 2022 ("the Amendment Act") has prompted regulatory bodies to strengthen oversight and align South Africa's regulatory framework with international standards. The South African Revenue Service ("SARS") is one of the regulators that has intensified its focus on trusts and their compliance obligations. In recent years, SARS has adopted a more rigorous approach to ensuring that trusts comply with both the Amendment Act and applicable tax requirements.

Trusts are now required to submit additional supporting documentation together with their annual tax returns and financial statements. This documentation includes minutes of trustee meetings at which decisions were made regarding the approval of financial statements and beneficiary distributions; resolutions confirming the amounts distributed or payable to beneficiaries; the latest trust deed; the Letter of Authority; and the beneficial ownership register.

In addition to these enhanced disclosure requirements, SARS has made it clear that non-compliance will not be tolerated, particularly regarding trust tax returns for the 2024/2025 assessment period. This stance follows instances in which trusts failed to comply with final demands issued by SARS requiring submission of outstanding tax returns within 21 business days of the final demand's issue date. Where a trust fails to comply with a final demand within the prescribed period, SARS may impose penalties for late submission and non-compliance.

These penalties take the form of fixed monthly administrative penalties ranging from R250 to R16,000 per month, depending on the trust's taxable income or assessed loss. SARS has already begun imposing such penalties, highlighting its commitment to enforcing compliance among trusts.

Trustees should be aware that they may, in certain circumstances, be held personally liable for penalties imposed on a trust where the non-compliance resulted from their failure to ensure that the trust met its statutory obligations. Trustees are required to exercise the care, diligence, and skill that can reasonably be expected of a person managing another's affairs. It is therefore essential that trustees ensure that trust tax returns are submitted timeously and that all supporting documentation is complete and accurate.

The role of a trustee has always carried significant responsibility, but the level of scrutiny and accountability continues to increase as regulatory bodies such as SARS sharpen their focus on trust governance and compliance. Trustees face numerous administrative and regulatory obligations, and failure to keep pace with evolving legislative requirements may expose them to personal liability and financial consequences.

As regulatory scrutiny of trusts continues to increase, trustees can no longer afford to take a reactive approach to compliance. Proper trust administration, accurate record-keeping, and timely compliance with SARS requirements are essential. In the current environment, the focus is not only on whether a trust was established correctly, but also on whether it is being administered correctly and in accordance with its legal obligations.

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