SARS Issues Compliance Warning to Trusts, Urges Timely Tax Submissions

“Once the Master has issued a written confirmation of termination, trustees should then approach SARS to deregister the trust for income tax purposes,” the statement noted.

The South African Revenue Service (SARS) has issued a firm directive to all registered trusts across the country, reminding trustees of their legal obligation to submit income tax returns for every year of assessment—regardless of whether the trust conducted any economic activity.

In a statement released on Thursday, SARS emphasized that non-compliance with tax filing requirements could result in administrative penalties, underscoring the importance of maintaining up-to-date tax records even for dormant or inactive trusts.

The tax authority clarified that trustees, as representative taxpayers under the Income Tax Act, carry full responsibility for ensuring that all tax obligations of a trust are met. This includes the submission of outstanding returns, settlement of any tax liabilities, and adherence to all regulatory requirements before taking steps to terminate a trust.

“Trusts are required to submit income tax returns annually, irrespective of whether they were active or generated income during the relevant period,” SARS said, reinforcing that inactivity does not exempt entities from compliance.

The warning comes amid growing concerns over the number of trusts that remain registered but non-compliant, often due to inactivity or lack of awareness among trustees regarding their ongoing obligations.

SARS has also provided clear guidance for trustees seeking to wind down trusts that are no longer serving their intended purpose. According to the revenue service, the correct process involves first ensuring full tax compliance with SARS before initiating termination proceedings through the Office of the Master of the High Court.

This sequence is critical, as failure to regularise a trust’s tax affairs prior to termination could lead to complications—including the inability to process potential tax refunds.

“Once the Master has issued a written confirmation of termination, trustees should then approach SARS to deregister the trust for income tax purposes,” the statement noted.

While the Trust Property Control Act does not explicitly outline a deregistration procedure, a directive issued by the Chief Master in 2017 provides clarity on the administrative steps required to formally terminate a trust.

SARS highlighted a key legal implication often overlooked by trustees: once a trust is officially terminated by the Master, it ceases to exist as a legal entity. Consequently, SARS is no longer able to process or pay out any refunds that may have been due to the trust.

This creates a potential financial risk for trustees who prematurely dissolve trusts without first ensuring that all tax matters are resolved.

“Trustees are therefore urged to follow the correct sequence: first confirm and regularise the trust’s tax affairs with SARS, and only thereafter proceed with termination at the Master,” the revenue service said.

Beyond regulatory compliance, the guidance also serves to protect trustees from potential personal liability. In cases of non-compliance, trustees may be held accountable for penalties or unresolved tax matters, particularly where due diligence has not been exercised.

Tax experts note that this renewed emphasis by SARS aligns with broader efforts to tighten governance and improve transparency within South Africa’s tax system. Trusts, often used for estate planning and asset management, have come under increasing scrutiny to ensure they are not misused or left dormant without proper administrative oversight.

The revenue authority’s call to action is expected to prompt trustees to review the status of their trusts, update outstanding filings, and take appropriate steps to either maintain compliance or initiate orderly deregistration.

As SARS continues to enhance its compliance framework, trustees are being urged to act proactively—ensuring that all legal and tax obligations are fulfilled to avoid penalties and safeguard financial interests.