October A Modernised Income Tax Return for Trusts (ITR12T) SARS (7277)

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1 October 2014 A Modernised Income Tax Return for Trusts (ITR12T) SARS (7277)

2 A MODERNISED INCOME TAX RETURN FOR TRUSTS (ITR12T) The South African Revenue Service (SARS) has introduced a modernised and fully customised Income Tax Return for Trusts (ITR12T) replacing the old IT12TR return. The new return aims to improve the experience you will have when completing it because it is interactive and fully customised as well as pre-populated with the trust s information. Furthermore, assessment results will be available in real-time. TRUSTS A founder creates a trust for the benefit of beneficiaries. A trustee is normally the representative taxpayer of a trust. Trusts can be described in various ways according to: The way in which they were formed, namely during the lifetime of a person or upon their death under a will The rights they grant to beneficiaries Their purpose, namely trading trusts, asset protection trusts, charitable trusts or special trusts. Types of Trusts The following types of trusts may be formed: Special Type A a trust that has solely been created for the benefit of a person that suffers from a defined mental illness as defined by section 1 of the Mental Health Care Act, 2002 (Act No.17 of 2002) or a serious physical disability. A Special Type A Trust should apply at a SARS branch to be classified as a special trust. A Type A Trust qualifies for certain relief from Capital Gains Tax. See our Comprehensive Guide to Capital Gains Tax Special Type B a trust that has solely been created for the benefit of persons who are relatives of the deceased person and who are alive on the date of death of that deceased person and the youngest of the beneficiaries of the trust are under the age of 21 years on the last day of the year of assessment Inter Vivos a trust set-up during the lifetime of a person Testamentary a trust set up in terms of the will of a person and which comes into effect after their death. The income or capital rights of a trust are either: Vested meaning the amount of income/capital distributed belongs to the beneficiary. Under a vesting trust the beneficiaries have a vested right to the income and/or capital of the trust Discretionary meaning the beneficiaries are not entitled to any income/capital unless the trustees decide to make a distribution to the beneficiaries. Under a discretionary trust the trustees have the choice as to whether and how much of the income or capital of the trust to distribute to the beneficiaries Combination which is a combination of both vested and discretionary rights. All trusts are required to register with SARS. 2

3 PLEASE NOTE: The way you register for tax and customs and update your existing details has changed from 12 May SARS now has a Single Registration of a taxpayer across all taxes they pay and legal entities they are associated with. From a taxpayer s view, you will only have to register once as a new taxpayer and thereafter add only the relevant details when you start paying, e.g. VAT. It will also now be easier to update your existing details. HOW IS A TRUST TAXED? A trust is taxed at 40%, but a special trust is taxed at a sliding scale from 18% to 40%. Income of a trust is taxed in the hands of one of the following: Donor Beneficiary Trust. WHEN MUST AN INCOME TAX RETURN FOR TRUSTS BE SUBMITTED? The trustee must annually complete and submit an Income Tax Return for Trust to SARS. If applicable, the mining schedule and IT10 schedule must be sent with the Income Tax Return for Trusts. No other supporting documents (relevant material) need to be submitted unless requested by SARS but must be kept for a period of five years. THE NEW INCOME TAX RETURN FOR TRUSTS (ITR12T) The contents of the return is fully customisable based on answers to certain questions presented to you for completion. Trust details will be pre-populated and assessment results will be available to you immediately after submitting the return. The new ITR12T return replaces the previous IT12TR. The main features of the enhanced return are: Expanded financial and legal reporting requirements Full details of all parties contributing funds, assets, etc. into the trust will need to be provided as well as details of the actual transactions made Full details of any party benefitting in any way from the trust as well as details of the benefits received or enjoyed will need to be provided for every beneficiary. What this means for you SARS will no longer accept the old IT12TR return Details of all parties either making contributions in any form into the trust or benefitting from the trust in any way will be required. These details include identification and demographic information of the parties Details of all parties and the actual transactions must be obtained so that it can be captured on the return efiling is the preferred channel for submitting your ITR12T and the required supporting documents (relevant material) must be uploaded on efiling by selecting the Supporting Documents option SARS branches will no longer print trust returns. 3

4 THE ENHANCED ITR12T Enhancements to the Income Tax Return for Trusts (ITR12T) include modifications in terms of legislation and new fields for completion. You will be able to create a fully customised return by completing the Information to create income tax return page on the interactive return/wizard. The answers you give on the Information to create income tax return page will allow for a distinction between bigger and smaller trusts. WHAT ARE THE BENEFITS OF THE NEW RETURN? You will be able to create a customised return by using the wizard The wizard will guide you through the steps to follow and information that is required The new return is customised according to your specific needs and will only populate the information which is applicable to the trust. BEFORE YOU GET STARTED Information required when completing the ITR12T The trust must provide the details of the following transactions that took place during the year of assessment: Capital or revenue distributed or vested in beneficiaries Distributions or vesting of non-taxable income Distribution or vesting of capital or assets Loan(s) granted and received Donation(s) or contribution(s) made or received Distributions received from other trusts or foundations Refund(s) received on contribution(s) made to this trust The right of use of asset(s) granted. Trusts with less than or equal to 50 distinct persons to whom the abovementioned transactions apply during the year of assessment: Details of every party who participated in any of the previous transactions will be requested. Trusts with more than 50 distinct persons to whom the abovementioned transactions apply during the year of assessment: Details of parties who participated in any of the previous transactions will be requested at a consolidated level Details of each transaction for every person (limited to 50) with the highest transactions in excess of R

5 PLEASE NOTE: For years of assessment 2014 and prior, the abovementioned transactional information is optional except where the person is a beneficiary. If the person is a beneficiary, all the transactions where money was received from the trust must be disclosed. For years of assessment 2015 all the details of all transactions will be mandatory, even for prior years. Supporting documents (relevant material) and additional information To complete the Income Tax Return for Trust, the following supporting documents (relevant material) is needed: Financial statements and/or administration accounts All certificates and documents relating to income and deductions Proof of payment of any tax credits Particulars of assets and liabilities. Please complete the following schedules, where applicable, as you will be required to upload these in respect of your ITR12T submission. You will be able to upload the required supporting documents via efiling by clicking on the Upload supporting documents link at the time of filing: If the trust was engaged in mining or mining operations as defined in section 1 of the Income Tax Act, complete Schedules A and B available on the SARS website If the trust, together with any connected person in relation to the trust, holds at least 10% of the participation rights in any controlled foreign company (CFC), complete the IT10 schedule available on the SARS website. Maintaining registered particulars of the trust You will first need to maintain the legal entity particulars before completing the ITR12T Before completing your ITR12T, make sure that the contact, address and banking and public officer details of the trust are correct by verifying and updating where required on the Registration, Amendments and Verification Form (RAV01). You can verify and update the RAV01 details by: Clicking on the Maintain Registered Particulars on efiling. SARS may request you to come into a branch to verify any changes to your banking details which may have been done via efiling Visiting a SARS branch. Please consult the RAV01 guide on the SARS website to prepare the mandatory supporting documents (relevant material) required for updating of banking and public officer details at a SARS branch. HOW WILL I GET THE NEW RETURN (ITR12T)? The new and improved Income Tax Return for Trusts (ITR12T) is only available on efiling, at a SARS branch and on the SARS website. The option to request the ITR12T to be posted to you is no longer available and printing of the return is no longer available at a SARS branch. 5

6 SUBMITTING THE ITR12T The ITR12T can only be submitted via the following channels: efiling SARS branch. To limit printing on paper, SARS branches offer the option to have the Notice of Assessment (ITA34) sent via when you submit your ITR12T electronically with the assistance of a branch agent. Rules when submitting the ITR12T If the trust has more than 10 persons/beneficiaries to who any of the following transactions were applicable during the year of assessment, the trust must submit the ITR12T via efiling. Where the trust has 10 or less persons/beneficiaries to who any of the following transactions were applicable during the year of assessment, the trust may submit the ITR12T at a SARS branch or on efiling: Capital or revenue distributed or vested in beneficiaries Distributions or vesting of non-taxable income Distribution or vesting of capital or assets Loan(s) granted and received Donation(s) or contribution(s) made or received Distributions received from other trusts or foundations Refund(s) received on contribution(s) made to this trust The right of use of asset(s) granted. Smaller trusts that are not registered for efiling need to submit their ITR12T electronically at a SARS branch where an agent will capture the return. The required supporting documents (relevant material) need to be presented at the branch. For more information on supporting documents, refer to the Comprehensive guide to completion of the ITR12T return for trusts available on the SARS website Manually completed and posted ITR12Ts will not be accepted. MORE INFORMATION If you would like further information on trusts and the new Income Tax Return for Trusts (ITR12T) please visit the SARS website or call the Contact Centre on

7 DISCLAIMER The information contained in this leaflet is intended as guidance only and is not considered to be a legal reference, nor is it a binding ruling. The information does not take the place of legislation and readers who are in doubt regarding any aspect of the information displayed in the leaflet should refer to the relevant legislation, or seek a formal opinion from a suitably qualified individual. For more information you may: Visit the SARS website Visit your nearest SARS branch Contact your registered tax practitioner Contact the SARS National Contact Centre If calling locally, on SARS (7277) If calling from abroad, on (only between 8am and 4pm South African time). 7

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