SARS cracking down on these investments in South Africa

SARS is preparing to enforce strict trust compliance, introducing administrative penalties and heightened oversight to ensure all trusts file returns and IT3(t) submissions, regardless of activity level.

Zasha de Lange, manager of trust and deceased estate tax compliance at Tax Consulting SA, warned that the South African Revenue Service’s (SARS) longstanding tolerance of delayed or omitted trust submissions may soon come to an end.

The South African Institute of Chartered Accountants (SAICA) formally reported to members that SARS advised of its intention to start levying administrative non-compliance penalties on the Trust ITR12T return in February 2026.

“Although no formal communication in this regard has been received from SARS, the market has been waiting for this, as the tax authority continues to clamp down on trust tax compliance,” de Lange said.

Trusts are not the only type of investment that has recently been scrutinised by the South African tax authorities. The National Treasury is also currently investigating closing a collective investment scheme (CIS) tax loophole.

This loophole allows South African investors to defer capital gains tax by transferring shares into CISs before selling them.

This practice, which exploits Section 42 of the Income Tax Act, enables tax-neutral asset transfers and often avoids VAT, giving investors an unintended advantage.

The proposed changes, outlined in the 2025 Draft Tax Bills and Regulations, aim to tighten oversight of CIS transactions and reduce the tax gap.

Now, in the run-up to Trusts’ Filing season 2025/2026, SARS has reiterated that all trusts, irrespective of their activity level, are required to file annual income tax returns.

“The misconception that dormant or ‘low-activity’ trusts may avoid compliance has now been expressly dispelled,” de Lange said.

From a practitioner’s perspective, trustees must recognise that the filing obligation arises from the legal existence of the trust itself, not its financial activity, de Lange noted.

The official filing season for trusts runs from 20 September 2025 to 19 January 2026. SARS is expected to publish a formal notice in due course.

Turning point for trusts

“In addition to the requirement to submit annual tax returns, the 30 September 2025 IT3(t) reporting deadline is one of the most pressing compliance requirements for trustees and administrators,” de Lange said.

She explained that these third-party data submissions, which capture distributions and vesting information, feed directly into SARS’s compliance systems. This enables cross-checks with beneficiaries’ tax affairs.

“Late or incomplete IT3(t) submissions will not simply disappear into the system unnoticed. They are the building blocks of SARS’s enhanced trust compliance strategy.”

“Most notably, as reported by SAICA, SARS has signalled its intention to impose administrative non-compliance penalties, potentially from the upcoming filing season.”

De Lange warned that this has serious implications for trustees overseeing trusts that are historically non-compliant.

The administrative penalty regime is designed to be automated, which means that once implemented, enforcement may be swift and difficult to contest.

For accounting, tax, and legal practitioners, the implications are clear, she said. In the first place, historic clean-up is essential, and dormant or overlooked trusts must be brought into compliance before penalties are levied.

Stronger trustee guidance is also required. “Trustees must understand that non-compliance is no longer a low-risk option.”

Finally, integrated professional support is also crucial. “Given the interplay between accounting, tax, and fiduciary duties, a multi-disciplinary approach to trust compliance is not only advisable but increasingly necessary.”

De Lange stressed that SARS’s recent crackdown efforts mark a turning point in the administration of trusts.

“For practitioners, it is an opportunity to reinforce to trustees that compliance is not optional and that proactive engagement now will mitigate risk later.”

“The regulatory trajectory is clear: trusts that fail to comply will face financial and administrative consequences.”