Guide to the Income Tax Return for Trusts – 11 April 2025 – Layman Version

What Exactly is a Trust?

• • A Trust is a legal arrangement where a person (called the founder, donor, or settlor) places money or other assets under the management and control of one or more trustees [16b]. These assets are held for the benefit of specific individuals or groups (the beneficiaries) or for a particular purpose [16b].
  • In South Africa, there are three main types of Trusts recognized by law:
    • Ownership Trust (also known as a Discretionary Trust) [16ci]:
      • The founder transfers the ownership of assets or property to the trustees [16ci].
      • These assets are held in the Trust for the benefit of named or identifiable beneficiaries [16ci].
      • This type of Trust is often called “discretionary” because the trustees usually have the power to decide if and how much income or capital to distribute to the beneficiaries [20, 104ii]. Beneficiaries, in this case, only have a “hope” or “contingent right” to the income or capital.
    • It can be created:
      • During someone’s lifetime (inter vivos) [16ci, 19iA].
      • Through a Last Will and Testament after someone’s death (mortis causa) [16ci, 19iB].

Bewind Trust (also known as a Vesting Trust):

• • The founder transfers ownership of assets or property directly to the beneficiaries of the Trust.
  • The assets remain the property of the beneficiaries, but the trustees are given the control to administer these assets [17, 19iiA].
  • Beneficiaries in this type of Trust are said to have “vested rights” to the Trust’s income or assets, meaning they are the true owners, and the trustees merely manage the fund [19iiA, 104i].
  • Like the Ownership Trust, it can be created inter vivos or mortis causa.

Curatorship Trust:

• • In this Trust, the trustees manage assets for a beneficiary who is unable to manage their own affairs, such as a person with a disability.
  • Trusts can also be described by:
    • How they were formed:
      • Inter Vivos Trust: Created while the founder is alive [19iA, 33a].
      • Mortis Causa Trust (Testamentary Trust): Created after an individual’s death through their Last Will and Testament [19iB, 34b].
    • The rights given to beneficiaries:
      • Vesting Trust: Beneficiaries have a guaranteed right to income or capital [19iiA, 104i].
      • Discretionary Trust: Trustees have the choice to distribute income or capital, so beneficiaries only have a potential right [20, 104ii]. Some trusts might even have a mix of both (hybrid rights).
      • Their purpose: Examples include trusts for estate planning, conducting business (trading trusts), protecting assets, charitable activities, or special situations.
  • Key People Involved in a Trust
    • • Founder (or Donor/Settlor): This is the person who starts the Trust and transfers the initial cash or assets into it [16b, 33a].
      • Trustee(s): These individuals or entities are responsible for managing and controlling the Trust’s assets [16b]. They have important responsibilities, called fiduciary duties, which mean they must act with great care and diligence for the Trust’s benefit [32a, 35d]. They can only officially act as trustees once they have received a “Letters of Authority (LoA)” from the Master of the High Court [18d, 53E]. Trustees must always act together when making decisions [35d].
      • Beneficiary(ies): These are the people or entities who receive benefits from the Trust [16b].
  • Who Needs to File the ITR12T (Income Tax Return for Trusts)?
    • Trusts are considered a “person” for tax purposes, meaning they are taxpayers in their own right [38a].
    • The trustees of the Trust, or a tax practitioner they appoint, are responsible for completing and submitting the ITR12T [38a].
    • All resident Trusts are required to file an annual income tax return (ITR12T), no matter if they had business activity or not [37ci].

Special Types of Trusts for Tax Purposes:

• • Special Trust – Type A: This Trust is created only for the benefit of one or more persons who are relatives of the founder and have a disability that prevents them from earning enough income or managing their own money [39, 102D]. SARS approval is required for this classification [40A, 102D]. The Trust stops being a Type A Trust if all beneficiaries with disabilities pass away [40B].
  • Special Trust – Type B: This Trust is established through a deceased person’s Last Will and Testament [40ii, 102E]. It is solely for the benefit of the deceased’s relatives who were alive at the time of death, and the youngest of whom is under 18 years old at the end of the tax year [40ii, 102E].
  • Collective Investment Schemes (CIS): These are investment schemes where the public invests money, and investors hold a share in a portfolio. A portfolio of a collective investment scheme in securities must be registered with SARS as a Trust for income tax purposes.
  • Why Trusts Cannot Be “Dormant” (and What a “Passive Trust” Is)
  • There’s a common misunderstanding that Trusts can simply be put into a “dormant” state, like some companies [36a]. This is legally incorrect [36a].
    • Trusts Cannot Be Dormant: Even if a Trust has no economic activity, it doesn’t mean it’s “dormant” [36a]. The trustees are always accountable for the Trust’s tax matters and their fiduciary duties (important responsibilities) remain throughout the Trust’s life [32a, 36b].
    • “Passive Trusts”: SARS recognizes that some Trusts don’t have economic activity. For these, SARS has created a simplified ITR12T tax return, labeling them “Passive Trusts” [33b, 36d, 78a].
    • What Passive Trusts Must Still Do: Even a Passive Trust must continue to comply with:
      • All tax laws (like the Income Tax Act and Tax Administration Act) [37ci].
      • The Trust Property Control Act (TPCA) [37cii].
      • Their Common Law fiduciary duties [37ciii].
      • The terms of the Trust Deed, which might include holding annual meetings and preparing financial statements (especially if the Trust holds personal assets like homes or vehicles for the founder or beneficiaries) [37civ].

How to Get and Submit Your ITR12T

• • • • eFiling (Online):
        • This is the quickest and easiest way [43a]. Register as an eFiler on www.sars.gov.za [43a].
        • Mandatory for Trusts with more than 10 beneficiaries at any point during the tax year [44b].

SARS Office (In Person/Virtual):

• • If your Trust is not registered for eFiling and has fewer than 10 beneficiaries, you can request an appointment via the SARS Online Query System (SOQS) or by visiting a SARS branch (by appointment only), or through voice/video calls with a SARS official [44a].
  • Be Prepared: You must collect, calculate, and organize all necessary information for the ITR12T before your visit [45b]. SARS officials will not help interpret your financial statements; they will only capture the information you provide [45bi].
  • No Post or Drop Box Submissions: SARS no longer accepts ITR12T returns sent by post or placed in SARS drop boxes [47 Note 1].

Correcting a Submitted Return (Request for Correction – RFC):

• • You can submit a corrected ITR12T via eFiling (if registered) or by appointment at a SARS branch [47a].
  • When correcting on eFiling, the return will be pre-filled with your last submitted information, and a new version number will be assigned [48b].
  • Important: You cannot request a correction if:
    • An audit case has been finalized.
    • SARS has performed a revised declaration or agreed estimate.
    • Relevant documents have been submitted after a compliance audit.
    • An active investigation or assurance audit is ongoing.
  • What Documents and Information You Will Need
  • You will need to provide various supporting documents, often indicated in a drop-down menu within the ITR12T form [50a, 50b].

Mandatory Documents for Most Trust Types:

• • Annual Financial Statements or Annual Administration Accounts [52A].
  • Minutes and Resolutions of the Trustees: All minutes must be submitted, except those dealing only with internal trustee management or administrative matters [52B].
  • A copy of the Trust Instrument (the Trust Deed or Last Will and Testament that created the Trust) [52C].
  • Beneficial Ownership Document for each entity listed [52D].
  • Letters of Authority (LoA) from the Master of the High Court [53E].

Additional Documents for Specific Situations:

• • Collective Investment Schemes (CIS): Also need the Trust Instrument [51B].
  • Non-Resident Trusts / Foreign Trusts: Also need details of the trustees and the protector [51E, 51F].
  • If the Trust (with any related persons) holds at least 10% of the participation rights in a Controlled Foreign Company (CFC): You will need to submit a Controlled Foreign Company (IT10) schedule [53iv, 114A].
  • If the Trust was involved in mining operations: You will need to submit Mining Schedules A & B [54v, 115A].
  • Keeping Your Records: You must keep all relevant supporting documents and schedules for five (5) years from the date you submitted the return [54c]. SARS may ask for these documents during this period to check the information you declared [54c].

Beneficial Ownership Documents:

• • To comply with Financial Action Task Force (FATF) requirements, SARS wants to record all beneficial owners (those who financially gain from the Trust) [380a].
  • At least one document providing beneficial ownership information must be submitted with your return [56ii, 382d].
  • This can include an organogram (a diagram showing control), an Excel spreadsheet with beneficiary details, or other relevant documents.
  • You can capture up to 20 beneficial owners per category directly on the form [57A, 382d]. If you have more than 20, you must upload a separate supporting document listing the additional owners [57B, 382dA]. This schedule is mandatory even if you have fewer than 20 beneficial owners [382dB].
  • For unnamed beneficiaries, select “Other” and provide a description from the Trust instrument and a short explanation [383e].

Getting Started with Your ITR12T (The Tax Form Wizard)

• • Before you start, make sure your Trust’s registered information (trustee details, address, contact details, bank account) is correct and up to date [68a]. You can do this on eFiling (“Maintain SARS Registered Details”) or at a SARS branch [68b].
  • The ITR12T uses a “Tax Form Wizard” to customize the return based on your Trust’s specific situation [70a, 71a]. You’ll answer key questions, and certain sections will appear or be hidden [71b].
  • Key questions in the wizard include:
    • Have Trust details (banking, contact, trustee) been verified? [72a] If “No,” you can’t file until these are updated [72iiA].
    • Is the trustee qualified (not disqualified by the Trust Property Control Act)? [73b]
    • Is this a Collective Investment Scheme? [74c]
    • Is the declaration made by a tax practitioner? [75d]
    • Does this return relate to a SARS Voluntary Disclosure Programme (VDP) application? [76e] (For taxpayers voluntarily correcting tax affairs) [107a].
    • Did the Trust enter into any “reportable arrangement” (arrangements that could result in a tax benefit)? [77f, 110b]
    • Is the Trust “Passive”? [78i] (This will give you a simplified return) [78a].
    • Did the Trust receive any local or foreign income/amounts from other Trusts? [79a, 84a]
    • Did the Trust receive any other local or foreign income/amounts? [80b, 85b] (You’ll then specify types like remuneration, interest, dividends, rental, business, farming, etc.) [80b, 85b].
    • Did the Trust sell any local or foreign assets resulting in a capital gain or loss? [87b, 87c]
    • Did the Trust receive any amounts considered non-taxable? [90a]
    • Does the Trust want to claim donations made to approved organizations (Section 18A)? [91b]
    • Were any Venture Capital Company shares sold for which a tax deduction was allowed? [92a]
    • Will the Trust be claiming any PAYE (Pay As You Earn) credits? [93a]
    • Is the Trust a partner in a partnership? [95a]
    • Specify the number of persons or beneficiaries who participated in transactions with the Trust (e.g., taxable income/capital gains, non-taxable income, capital distributions, loans, donations, contributions, right of use of assets) [98c].

Understanding Income and Capital for Trusts

• • The ITR12T requires detailed reporting of all types of income and capital gains/losses. For most income types, the process generally involves:
    • Reporting Gross receipts and accruals (your Trust’s income) [e.g., 132i].
    • Adding any aggregated amounts received or vested from other Trusts [e.g., 132ii].
    • Deducting Allowable expenses related to that income [e.g., 132iv].
    • Calculating the Taxable amount available for distribution or assessed loss retained in the Trust [e.g., 132v].
    • Subtracting any amounts distributed to or vested in beneficiaries [e.g., 133vi]. This is where the income or capital is passed on to the beneficiaries.
    • Important change from 2025 year of assessment: For amounts distributed to non-resident beneficiaries, these amounts will now be taxed in the hands of the Trust itself, rather than flowing through to the non-resident beneficiary [29A, 30C, 134vii, 138vii, 144vii, 148vi, 152vii, 157vii, 182x, 220e, 246xxii, 295vii, 303vii, 314x, 321viii, 328v, 335xi].
    • The remaining amount is the Taxable amount in the Trust (not vested in beneficiaries) [e.g., 134viii, 138viii, 144viii, 148vii, 152viii, 157viii, 183xi, 220f, 246xxiii, 284xii, 295viii, 303viii, 314xi, 322ix, 328vi, 335xii].

Key Income and Capital Sections to Report:

• • Local and Foreign Income from Other Trusts: You’ll detail any income or capital gains your Trust received as a beneficiary of other Trusts. These amounts will be combined with your Trust’s own income.
  • Local Income Types: This includes income from salaries, annuities, lump sum benefits, interest (excluding SARS interest), distributions from Real Estate Investment Trusts (REITs), dividends (specifically those deemed income under Sections 8E and 8EA), rental income from property, business and trading income (including crypto assets), farming income, and any other local income [80b].
  • Foreign Income Types: This includes foreign interest, dividends, farming income, imputed net income from Controlled Foreign Companies (CFCs), and other foreign income [85b].

Local Capital Gain/Loss:

• • This section applies when your Trust sells assets in South Africa [158a, 169j].
  • You’ll declare the proceeds (money received from the sale) and the base cost (original cost plus related expenses) [161c, 161d, 169i].
  • Capital Gains Tax (CGT) became effective on 1 October 2001 [158a]. Only the gain or loss since that date is subject to CGT [159b].
  • Annual Exclusion: SARS automatically applies an annual exclusion. For natural persons and Special Trust Type A, this is R40,000 from the 2017 tax year onwards [162i]. This exclusion reduces your taxable capital gain [162ii].
  • Inclusion Rate: From the 2017 tax year, 80% of a net capital gain is included in the Trust’s taxable income [163f]. SARS calculates this automatically [163fiii].
  • Capital Losses: A capital loss can only be offset against a capital gain; it cannot be used to reduce other types of income [164g]. A capital loss also cannot be distributed to beneficiaries [164g].
  • Foreign Capital Gains/Losses: Similar to local capital gains/losses, but for foreign assets [307a]. SARS also calculates the annual exclusion and inclusion rate for foreign capital gains/losses [308b].
  • Non-Taxable Amounts: You’ll report income that is exempt from tax, such as local dividends and certain exempt foreign dividends [90a, 339].

Deductions and Allowances:

• • Donations (Section 18A): You can claim deductions for donations made to approved public benefit organizations (PBOs) [91b, 341b]. From the 2024 tax year, you can enter details for up to 20 organizations, including their name [31A, 31B, 342c, 343B].
  • Enhanced Renewable Energy Deduction (Section 12BA): This is a temporary tax incentive (for new and unused assets brought into use between 1 March 2023 and 1 March 2025) [23C, 194xivA, 224i]. It allows businesses (including Trusts) to claim an upfront tax deduction of 125% of the cost of eligible renewable energy assets (like wind power, PV solar, concentrated solar, hydropower, biomass) [22B, 23D, 224ii]. You cannot claim both Section 12B and Section 12BA for the same asset during this period [24F]. If you sell the asset on or before 1 March 2026, the 125% deduction may be fully “recouped” (added back to your income) [25H, 215iii].
  • Urban Development Zone (UDZ) Allowance (Section 13quat): This tax incentive for developing properties in specific urban areas has been extended for two years, from 31 March 2023 to 31 March 2025 [27ii, 200A].
  • Learnership Allowance (Section 12H): This incentive to encourage skills development has been extended to 1 April 2024 [26a, 226a]. It offers specific deductions for entering and completing registered learnership agreements, with higher amounts for learners with disabilities [226b].
  • Loans to Trusts by Connected Persons (Section 7C): This section addresses interest-free or low-interest loans from a founder, beneficiary, or other related person to a Trust [27iii, 377ii]. The difference between the actual interest (if any) and interest calculated at an “official interest rate” is considered a donation by the connected person to the Trust and may be subject to donations tax [377ii]. There’s a clarified exclusion for funding the acquisition or improvement of a primary residence used by the connected person or their spouse, subject to certain land limitations [27iii, 28, 378i].
  • Statement of Assets and Liabilities
  • This section is mandatory for Trusts from the 2016 tax year onwards [119a]. You need to list:
    • Local Assets: Such as fixed property, shares, loans given, financial instruments (including crypto assets), business capital, equipment, vehicles, debtors, stock, livestock, and cash [120i]. You declare these at their original cost [120i].
    • Foreign Assets: The aggregate amounts of foreign assets, converted to South African Rands using the exchange rate at the end of the tax year when the asset was acquired [123a].
    • Local Liabilities: Such as mortgage bonds, loans received, creditors, and bank overdrafts [124b].
    • Foreign Liabilities: Aggregate amounts, converted to South African Rands using the exchange rate at the end of the tax year [125a].
    • Trust Capital: Report the retained earnings from your financial statements [125a].

Beneficial Ownership and Transparency (BOT)

• • SARS is collecting Beneficial Ownership information to comply with international Financial Action Task Force (FATF) requirements [380a]. The goal is to identify the natural persons who ultimately benefit financially from a Trust [380a, 382dB].
    • Who to Report: All beneficiaries who can be identified by name must be reported as Beneficial Owners [380b].
    • Required Information: You’ll need to provide details for different categories of beneficial owners, including [386b, 388b]:
      • Individuals: Initials, surname, date of birth, ID number (or passport details for non-SA residents), tax reference number (if SA-registered), place of birth, email, cell number, and physical address.
      • Companies/Trusts/Other Legal Entities: Registered name, trading name, registration number, tax reference number (if SA-registered), and physical address. For these entities, you’ll also need to capture details of the individual “warm body” (natural person) associated with that entity [389vi, 390].
    • Pre-population: Beneficial Ownership fields will often be pre-populated with information from previous years [384f].

Important Dates and Payment

• • Submission Due Date: The specific due date for ITR12T submission is announced annually in the Government Gazette and through SARS publicity campaigns [58a].
  • Payment Due Date: Your payment for tax due will generally be the 1st day of the month following your assessment, with an interest-free grace period until the end of that month [58a, 59b].
  • Provisional Taxpayers: If your Trust is a provisional taxpayer, you generally make two provisional tax payments per year [59a]. No payments are needed for periods less than six months [59a].

Final Declaration

• • Before submitting your return, the representative taxpayer (usually a trustee or tax practitioner) must make a declaration [392a, 393]:
    • Confirming they are the duly appointed representative [393i].
    • Stating that the information provided is true and correct to the best of their knowledge [393ii].
    • Confirming that all gross income received/accrued has been disclosed [393iii].
    • Confirming they have the necessary financial records and supporting documents and will keep them for audit purposes [393iv].
  • Be aware that misrepresentation, negligence, or providing false information can lead to penalties, additional tax assessments, interest, and even prosecution [392b].