South African trusts and wealthy individuals are facing increased scrutiny as the South African Revenue Service (SARS) sharpens its focus on tax transparency, offshore assets, and abuse of trust structures. While trusts have long been a valuable tool for estate planning and asset protection, recent regulatory trends suggest the days of “set it and forget it” trust planning are over.
In this blog, we unpack what’s changed, what SARS is targeting, and how you, whether a high net worth individual (HNWI), SME owner, or corporate stakeholder, can stay compliant and protected.
The Trust Crackdown Is Real
In 2023 and 2024, SARS introduced several key changes (and allocated the necessary resources thereto, such as artificial intelligence and interventions) that demonstrate its intent to enforce compliance and close loopholes:
- Mandatory disclosure of beneficial ownership:
SARS, alongside the Companies and Intellectual Property Commission (CIPC), now requires full disclosure of the natural persons who ultimately benefit from trusts and companies, a move aligned with FATF (Financial Action Task Force) recommendations. - Focus on connected persons and deemed donations:
SARS is enforcing section 7C of the Income Tax Act, which taxes interest-free or low-interest loans to trusts, often used by wealthy families to shift assets while avoiding donations tax. (Review these loan agreements urgently, for compliance!) - Offshore disclosures and CRS monitoring:
With the Common Reporting Standard (CRS) in full effect, South African residents’ offshore investments are now visible to SARS through automatic global information exchange.
What Is SARS Looking for?
If you are a trustee or beneficiary of a trust — or have a trust tied to your business or investment strategy — SARS is looking at:
- Interest-free or low-interest loans to trusts
- Non-compliant financial statements
- Failure to register trusts for income tax
- Under-declared income from trust-owned assets
- Lack of independent trustees (particularly for family trusts)
- Trusts used as “shell” entities with no real separation of control
Simply put: if you live like a millionaire but earn like a clerk, expect a call.
Consequences of Non-Compliance
Here’s what’s at stake if your trust is non-compliant:
- Up to 200% penalties and interest on underpaid tax
- Disallowance of deductions or tax-neutral transfers
- SARS audits and legal investigations
- Reclassification of transactions as disguised donations
- Criminal liability for trustees who fail to uphold fiduciary duties
What You Should Do Now
1. Conduct a Trust Audit
- Are your financials up to date?
- Are there any outstanding tax returns?
- Have all loans been disclosed and interest charged as per section 7C?
2. Appoint an Independent Trustee
- Especially for family trusts. This helps show genuine independence and prevents “alter ego” arguments in court.
3. Update Your Trust Deed
- Make sure it reflects current law and practice. Many old deeds contain outdated provisions that may now create risk.
4. Disclose Offshore Assets
- If you have funds, property, or trusts offshore – make sure they’re declared under the Voluntary Disclosure Programme (VDP) if needed.
5. Seek Professional Legal and Tax Advice
- Don’t DIY your compliance. Legal structuring is no longer a “back of the napkin” exercise.
How We Can Help
At André de Villiers & Associates Attorneys, we offer a comprehensive Trust & Compliance Legal Review Package, tailored to individuals, business owners, HNWIs, and corporate groups.
Our services include:
- Trust deed updates
- Section 7C loan reviews
- Tax compliance checks
- SARS audit preparation
- Ongoing trustee advice
Consider it insurance against future stress. You get peace of mind, legal clarity, and long-term protection.
Ready to Stay One Step Ahead?
Book your consultation on our live calendar from the comfort of your bed at www.advlegalservices.co.za or email us at info@advlegalservices.co.za.