SOUTH AFRICA: Trustees must now report beneficial ownership of trusts.

As published on step.org/industry-news, Thursday 11 May, 2023.

As of 1 April 2023, trustees of South African trusts must collect and report up-to-date information on the beneficial ownership of trusts under s.11A of the Trust Property Control Act, as amended last December by section 6 General Laws Amendment Act 2022.

The new rules aim to improve transparency regarding the ownership of trust assets before the assets and income vest in beneficiaries. The liability to report falls squarely on the trustee. Trustees must establish and record the beneficial ownership of the trust and keep a record of the prescribed information relating to the beneficial owners. They must also lodge a register of the prescribed information on the beneficial owners of the trust with the Master's Office and ensure that the reported information is kept up-to-date. Access to the disclosed information is restricted to the National Prosecuting Authority, the Financial Intelligence Centre and the South African Revenue Service (SARS).

The regime will be further extended from September 2023. At that point, trustees will be required to disclose the trustees and beneficiaries of their resident trusts to the SARS, with disclosure to be completed before the annual trust income tax return is submitted. The relevant information will be due on 30 September of the year in which the trust’s tax year ends. As well as details of beneficiaries, trustees will also be required to submit details of all financial flows including loans, donations and distributions.

For all distributions made by the trust during its tax year, trustees will be required to supply information electronically to SARS within seven months of the trust year-end.

Beneficial owners include founders, people who exercise effective control over the administration of the trust, vested beneficiaries, all trustees and each beneficiary named in the trust. All must supply information including full name, date of birth, nationality, official identity document or passport number, citizenship, residential address, tax number, category of beneficial ownership and date on which they became or ceased to be a beneficial owner.

If a discretionary beneficiary has ever received a distribution or is named as a beneficiary, the new rules appear to apply to them, according to consultancy EY. However, EY notes that if they are not specifically named and have not received any distributions, it is still unclear whether the new rules would apply. ‘Extreme care must be taken’, the firm warns. ‘Penalties for noncompliance are high and onerous.’ Failure to comply could result in a fine up to ZAR10 million or up to five years in prison.

From March 2024, similar reporting requirements will also apply to public benefit organisations and employers.

Also on 1 April 2023, the Companies Act 2008 (the 2008 Act) was amended to provide a mechanism for the Companies and Intellectual Property Commission (the Commission) to keep accurate and updated beneficial ownership information. It also allows the Commission to place obligations on companies to establish and maintain records of beneficial ownership and interest.

All companies will now be required to file an annual tax return with the Commission. For companies in scope of the 2008 Act, the return must include a copy of the company's securities register and the disclosure of beneficial interest. They must also maintain a register of the persons who hold beneficial interests beyond 5 per cent of its equity. Those companies out of scope must include a copy of their securities register along with information on all beneficial owners of the company.

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