The taxation of trusts in South Africa involves a ridiculously long list of administrative and reporting requirements. One of these requirements includes the submission of an IT3(t) return to SARS. This is not like your typical tax return, however, it should be treated as equal in importance.
IT3(t) returns play a crucial role in ensuring that the income distributed by the trust has been accurately taxed and disclosed for in the hands of the beneficiaries.
What exactly is an IT3(t) return?
An IT3(t) return is classified as a third party data submission made to SARS via their eFiling portal. This return discloses any and all income that has been distributed to beneficiaries of the trust during the respective tax year. This requirement is closely linked to the conduit principle, which is a South African trust taxation fundamental principle.
Why is this return so important?
The importance of the IT3(t) lies within the reassurance and transparency it provides. Enforcing this requirement allows SARS to verify whether the beneficiaries are declaring their distributions within their personal income tax returns. Think of it as a test of your integrity. The IT3(t) allows for trustees or tax practitioners to specify the different categories of income such as capital gains, rent, dividends etc. This too provides clarity to SARS on the method of tax they should implement when verifying your personal tax returns. SARS will use this information to pre-populate your personal income tax returns, ensuring that you do not leave it out by accident.
Trusts that have not made any distributions are still required to submit this return as well as the annual income tax return.
What information is required to complete this data submission?
The information included in an IT3(t) is comprehensive and demographic specific. This means you are required to provide SARS with identification information such as your full name, tax number, ID/passport number, physical and postal addresses and contact information. In addition to this information, you are required to specify how much each beneficiary has received in distributions as well as ensure the correct income category is utilised. The income categories refer any form of operation that generates an income such as rent, interest, dividends etc.
This information is then used by SARS to pre-populate the beneficiary’s personal tax returns and verify it to submitted tax returns and annual financial statements. Any discrepancies may result in verifications, audits and potentially even penalties.
In conclusion, these returns are in place to ensure that trustees and tax practitioners remain compliant with tax legislation.
If you would like assistance with IT3(t) filing or more guidance on third party data submissions, feel free to contact us on (011) 794-5582 or info@tlok.co.za