Update on the distribution of funds to non-resident Trusts by resident Trusts - 1 August 2025 - Layman Version

Understanding South African Trust Fund Distributions to Non-Residents: A Simplified Guide

• • Previously, the South African Revenue Service (SARS) generally did not approve resident trusts releasing funds when making distributions to trusts located outside South Africa (non-resident trusts).
  • However, SARS has now clarified its position and confirmed that it will consider approving such distributions. This change comes even though the South African Reserve Bank (SARB) has relaxed some exchange control requirements. SARS has introduced this new requirement to manage and reduce potential risks.

How to Apply for Approval (The Process):

• • If a resident trust wants to distribute funds to a non-resident trust, it must follow a specific process to get SARS’s approval:
    • You need to apply for a manual letter of compliance (MLCA).
    • This application should be sent via email to MLCA@sars.gov.za.

Key Conditions for SARS Approval:

• • SARS will carefully review each request and will only allow these distributions if certain strict conditions are met:
    • Beneficiary Status: The non-resident trust must be named as a beneficiary of the resident trust.
    • Trust Instrument Compliance: The distribution must comply with all the terms and conditions outlined in the official document (Trust Instrument) of the resident trust.
    • Tax Clearance: The resident trust must demonstrate that all tax liabilities related to that specific distribution have been, or will be, paid in full. SARS will perform verification processes to ensure these legal requirements are strictly followed.
  • For additional information or supporting documents related to international transfers, you can refer to the Supporting Documents for Approval of International Transfers (AIT) webpage.