Reporting requirements for trusts and PBOs now final

The final list of third-party data providers that are obliged to report taxpayer information to the South African Revenue Service (Sars) now includes trusts and public benefit organisations (PBOs), but excludes solar panel installers.

Trusts and PBOs can, on a voluntary basis, report for the first round in September this year, but from next year their third-party reports must be filed by the end of May each year.

Trusts

Sars now requires trusts to submit IT3(t) reports containing information about any amount vested in a beneficiary (distributions) of a trust, including income, capital gains and capital amounts between 1 March and the end of February the following year – by 31 May in the latter year.

This will be challenging, says the South African Institute of Chartered Accountants (Saica). It notes in an earlier submission to Sars that most of the information used to produce the financial statements for trusts is only available in April or May.

“It will be practically impossible for the financial statements, which are needed to establish the distribution information, to be finalised before 31 May.”

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An additional complication is that trust income is often earned in respect of other assets – such as loan accounts in private companies – and this information is only available once the underlying company’s financial statements have been finalised. In practice, this can be any time between the February year-end and the following January.

Joon Chong, partner at Webber Wentzel, says all trusts (residential and non-residential) must file third-party returns to Sars unless it is a collective investment scheme (CIS) or an employment share incentive scheme trust (ESIST).

No exceptions

All PBOs that issue Section 18A certificates for tax-deductible donations must submit their data reports going forward, says Chong.

She says Saica proposed that Sars consider limiting the reporting responsibility to taxpayers above certain thresholds, but this was not done.

Saica also proposed the phasing in of the reporting obligations over a few years and providing training to PBOs and trustees on data submissions.

“The third-party data submission process is complex, particularly for large volumes of records to be submitted using https,” Chong adds. The declarations must be submitted electronically using the designated Sars electronic filing service.

In its August 2022 submission, Saica asks for a deferral to 2025 to give taxpayers a 12-month period to implement systems and then do actual data-gathering in 2024 for reporting in the 2025 calendar year. This proposal was not accepted.

Aneria Bouwer, senior consultant at law firm Bowmans, says going forward, PBOs will have to submit bi-annual reports to Sars. The first submission will be for the period 1 March to 31 August and will be due by 31 October. The second submission will be for the period from 1 September to the last day of February and will be due by 31 May.

Bouwer says PBOs will not have to submit a return for the period 1 March to 31 August 2023 (due in October).

From then on, however, they will have to submit reports for each of these periods.

“From a practical perspective, an 18A [tax-exempt institution] PBO must retain the information reflected in the 18A certificates, so that they can include it in the Sars reports. This is obviously something new for PBOs, but hopefully, if they’ve done it once and they keep the information at hand, it should not be too cumbersome to implement on an ongoing basis.”

More detailed information about donors

Sars requires more detailed information to be included on the 18A certificates with effect from 1 March 2023.

Until the end of February, all that was required for a valid Section 18A certificate was: the name, reference number, address and contact details of the PBO; details of the donation (date of receipt, amount and nature of donation if not made in cash); name and address of the donor; and confirmation that the donation would be used exclusively for qualifying public benefit activities, such as education, welfare and health care.

From 1 March this year, the certificate must also include:

• Donor nature (natural person, company, trust);
• Donor identification type and country of issue (in case of a natural person);
• Identification or registration number of the donor;
• Income tax reference number of the donor (if available);
• Contact number of the donor;
• Email address of the donor;
• A unique receipt number; and
• Trading name of the donor (if different from the registered name).

Chong says 18A entities include all PBOs, PBOs that fund other PBOs, a closed list of United Nations and similar entities, and any government department approved by Sars to carry out public benefit activities.

Solar excluded

In the March draft notice, persons who issue solar installation certificates of compliance for new and unused solar panels at a residence were also included as third-party data providers.

However, they have been excluded from the final notice published in June.

Saica noted that it was neither rational nor reasonable, given that this reporting would have been done for a single year (the rooftop solar incentive for individuals is only for one year).

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The institute also noted that no industry consultation ever took place, never mind the publication of any business requirement specifications on how they should have reported.