Understanding the New Rules Governing Trust Ownership in South Africa

In recent years, South Africa has implemented significant changes to trust ownership regulations under the Trust Property Control Act, No. 57 of 1988 to enhance transparency and combat financial crimes such as money laundering and terrorism financing. These reforms primarily focus on the disclosure of beneficial ownership within trusts. This comprehensive guide outlines the new rules, their implications, and the responsibilities of trustees under the updated legal framework.


Understanding these new rules is essential for trustees, beneficiaries, and anyone involved in trust management…

Introduction of Beneficial Ownership in Trusts

Beneficial ownership refers to the natural persons who ultimately own or control a legal entity or arrangement, such as a trust. Identifying these individuals is crucial for transparency and regulatory compliance.

Key Legislative Amendments

The Trust Property Control Act No. 57 of 1988 (TPCA) has been amended to incorporate new provisions regarding beneficial ownership:

 

Definition of Beneficial Owner: The TPCA now defines a beneficial owner as:

  • A natural person who directly or indirectly ultimately owns the trust property.
    • A natural person who exercises effective control over the administration of the trust.
    • Each founder of the trust.
    • Each trustee of the trust.
    • Each beneficiary referred to by name in the trust instrument.

  • Trustee Obligations: Effective from 1 April 2023, trustees are required to:

    • Establish and record the beneficial ownership of the trust.
    • Maintain an up-to-date register of beneficial owners.
    • Lodge this register with the Master’s Office.
    • Ensure continuous updating of the information.

Detailed Trustee Responsibilities

Trustees must undertake the following actions to comply with the new regulations:

  • Identification: Determine all individuals who qualify as beneficial owners under the amended TPCA.

  • Record-Keeping: Collect and maintain detailed information on each beneficial owner, including:

    • Full legal name.
    • Date of birth.
    • Nationality.
    • Residential address.
    • Identification number (e.g., ID or passport number).
    • Nature and extent of the beneficial interest held.
     

  • Reporting: Submit the beneficial ownership register to the Master’s Office and update it whenever there are changes.

  • Accessibility: Ensure that the register is readily available for inspection by authorized entities, such as regulatory bodies and financial institutions.

Limited Access to Beneficial Ownership Data

While the purpose of these changes is to improve transparency, access to this sensitive information will be restricted to specific government authorities, including:

  • The National Prosecuting Authority (NPA)
  • The South African Revenue Service (SARS)
  • Other designated regulatory bodies involved in financial oversight

Additional Reporting Obligations to SARS

Beyond the disclosure requirements set by the Master’s Office, SARS has introduced additional reporting duties for trustees. Trustees are now considered third-party data providers, similar to banks and financial institutions.

 

Each trust must submit an IT3(t) form annually by September 30, detailing demographic and financial information. This new requirement adds administrative complexity and increases compliance responsibilities for trustees.

Electronic Submission of Trust Data

Depending on the number of records, trustees must electronically submit data to SARS using designated platforms:

  • Fewer than 20 records → Use SARS eFiling
  • Between 21 and 50,000 records → Use Secure HTTPS upload
  • More than 50,000 records → Use Connect Direct bulk data filing

SARS has also published an extensive 272-page guideline detailing IT3 data submission requirements, covering demographic details, financial transactions, and reporting obligations.

Compliance Deadlines

Trustees were required to comply with these obligations starting from 1 April 2023. Ongoing compliance involves updating the register promptly upon any changes in beneficial ownership and submitting these updates to the Master’s Office.

Penalties for Non-Compliance

Failure to adhere to the new requirements can result in severe penalties, including:

  • Fines: Substantial monetary penalties of up to 10 million Rand, and or imprisonment can be imposed on the trust or trustees.

  • Imprisonment: In cases of serious non-compliance, trustees may face imprisonment of up to five years and or a fine.

  • Reputational Damage: Non-compliance can harm the trust’s reputation, affecting relationships with beneficiaries and financial institutions.

Practical Steps for Trustees

Ensure compliance with the new regulations, trustees should:

  • Conduct a Thorough Review: Assess current trust documents and structures to identify all beneficial owners.

  • Establish Robust Record-Keeping Systems: Implement secure systems to maintain and update beneficial ownership information.

  • Seek Professional Advice: Consult with legal and financial experts to navigate the complexities of the new requirements.

  • Educate Beneficiaries: Inform beneficiaries about the new disclosure obligations and how their information will be handled.

Navigating the New Trust Laws: Get Expert Guidance

The new rules for trust ownership in South Africa mark a significant shift towards greater transparency and accountability. Trustees must proactively adapt to these changes to ensure compliance and uphold the integrity of their trust arrangements. By understanding and implementing the detailed requirements outlined above, trustees can effectively navigate the evolving regulatory landscape.

 

At TrustNest Solutions, we specialize in trust formation, compliance, and estate planning. Our team is ready to help you navigate the new laws and avoid costly penalties. Contact us today for expert advice tailored to your trust’s unique requirements.

 

For further information and guidance, trustees are encouraged to consult the official resources provided by the South African Revenue Service (SARS) and the Master’s Office.