SARS has a new target

The South African Revenue Service (SARS) has put trusts firmly in its crosshairs, moving to aggressive enforcement with final demand letters and looming monthly penalties that make trustees personally accountable for any tax non-compliance.

Tax Consulting SA’s senior tax consultant, Sohail Arnoldus, warned that South African trusts and trustees are entering a far more unforgiving tax enforcement environment.

SARS has shifted from a lenient approach to a more formalised and assertive regime of administrative non‑compliance penalties under the Tax Administration Act (TAA).

Besides sending reminders and warnings to trusts to meet tax return submission deadlines, the tax authority has, since December 2025, ramped up its collection efforts.

It has started telephoning trustees, tax representatives, and tax practitioners of trusts with outstanding returns to remind them to submit immediately.

On 3 February 2026, SARS began its first roll-out of final demand letters under the TAA, clearly signalling that failure to meet trust tax obligations will now carry measurable consequences for trustees.

“The Act empowers SARS to issue public notices specifying incidents of tax non‑compliance that attract fixed administrative penalties, and to impose these penalties when taxpayers fail to comply,” Arnoldus said.

Historically, SARS most consistently applied these penalties to individuals and companies for late or non‑submission of tax returns.

“Trusts, in contrast, often received warnings or were encouraged to voluntarily regularise their affairs rather than being penalised. This enforcement landscape is now changing significantly,” he said.

“On 3 December 2025, SARS published a draft public notice proposing the imposition of administrative penalties on trusts that fail to submit outstanding returns. The notice remained open for public comment until 28 January 2026.”

Arnoldus explained that over late 2025 and into early 2026, Tax Consulting SA has seen in practice how SARS has stepped up its focus on trust tax compliance.

The taxman has been issuing increasingly frequent official reminders to trustees and tax practitioners about the 2024/25 trust filing season deadline.

This, he said, emphasising that all trusts must meet submission deadlines, warning that non-compliance can attract penalties and enforcement action and contacting those with outstanding returns.

Point of no return for non-compliant trusts

“With issuing final demand letters, SARS sends a clear message to trustees that there is no turning back,” Arnoldus said.

SARS grants the trusts 21 business days to file the outstanding returns as indicated in the letter. Failure to do so will result in monthly administrative penalties per return, ranging from R250 to R16,000.

Further non-compliance could result in a summons and/or criminal prosecution, which, upon conviction, is subject to a fine or imprisonment for up to 2 years.

These communications form part of SARS’s strategy to enforce compliance trust sector, ahead of anticipated administrative non-compliance penalties.

Arnoldus stressed that every trust, whether active, dormant, passive, or of negligible activity, must register for tax with SARS and submit annual income tax returns (ITR12T).

He explained that the list of mandatory submissions includes, but is not limited to, the following –

• ITR12T – Annual income tax return submission
• IT3(t) – Third-party data return for trusts
• IRP6 – Provisional tax return if the trust is a provisional taxpayer or is required to be one
• VAT201 – For trusts that are VAT-registered
• EMP201 and EMP501 – Employees’ tax returns for trusts that employ staff

“SARS has emphasised that being ‘dormant’ does not exempt a trust from filing. Trustees have a statutory obligation to ensure that the trust complies fully with all tax requirements,” he said.

“This responsibility includes submitting returns within the prescribed deadlines, preparing accurate and complete financial information, and maintaining comprehensive, reliable records to support all disclosures made to SARS.”

Preparing for the new compliance era

The draft public notice primarily concerns the submission of annual income tax returns. However, Arnoldus said its scope is even broader, ultimately applying to any trust that fails to submit returns when required and due.

“Trustees cannot afford to take their responsibilities lightly,” he said. Proactive measures to address non-compliance may include –

• Confirming that the trust is correctly registered for all relevant SARS tax types
• Filing any outstanding returns without delay
• Implementing robust IT3(t) third‑party reporting processes
• Ensuring the trust’s accounting, administration, and record‑keeping comply with statutory and SARS requirements
• Addressing historic non‑compliance before the penalty regime is finalised and implemented.

“This approach reduces the risk of penalties and positions the trust for smooth compliance going forward,” Arnoldus said.

“Although the draft public notice has not yet been formally finalised, SARS’ direction is clear – trusts are firmly on the compliance radar, and non‑compliance will carry financial consequences.”

Arnoldus stressed that, with SARS already taking initial steps to enforce compliance, trustees should act before the anticipated implementation of administrative penalties.

“Trustees should act without delay to ensure all returns are up to date and that administrative processes align with SARS’ expectations,” he said.

“Taking early action will help avoid unnecessary penalties and safeguard the trust against escalating enforcement measures.”