The concept of beneficial ownership in trusts within South Africa has undergone significant changes, particularly with new regulations coming into effect in 2023 and 2024. These changes aim to improve transparency in trust management and ownership, aligning with international standards to combat financial crimes like money laundering and tax evasion.
Key Legislative and Regulatory Changes:
- General Laws Amendment Act and Trust Property Control Act:
The General Laws (Anti-Money Laundering and Combating Terrorism Financing) Amendment Act 22 of 2022, effective from April 2023, introduced a formal definition of ‘beneficial ownership’ in key laws affecting trusts and companies. This Amendment Act targets trusts as vehicles often used to facilitate criminal activities, aiming to create greater transparency in ownership and control.
Amendments to the Trust Property Control Act (TPCA), specifically sections 1 through 8 of the Amendment Act, introduced a broad definition of ‘beneficial owner’ along with reporting and disclosure requirements. The definition encompasses various parties, including direct or indirect owners of trust property, founders, trustees, and beneficiaries.
- New Reporting Requirements for Trusts:
Under the new rules effective from April 2023, trustees are mandated to establish and record the beneficial ownership of the trust, maintain a record of beneficial owners, and lodge this information with the Master’s Office. The required information includes personal details, citizenship, and the class or category of beneficial ownership.
Beneficial owners are broadly defined to include founders, trustees, vested beneficiaries, and anyone exercising effective control over the trust. Non-compliance can lead to penalties, including fines and imprisonment.
- Role of the Companies & Intellectual Property Commission (CIPC):
Amendments to the Companies Act, mirroring the approach of the Trust Act, place a heavy emphasis on ‘beneficial ownership’ in companies. Companies must maintain beneficial ownership records and report them to the CIPC. The CIPC is tasked with keeping accurate beneficial ownership information.
- South African Revenue Service (SARS) Involvement:
SARS has implemented its requirements for trust reporting, identifying significant non-compliance in trust registration, tax return submissions, and disclosures. Trustees now act as third-party data providers to SARS, similar to banks and insurance companies. They are required to submit an IT3(t) form for each trust, detailing demographic details of trustees and beneficiaries, and financial flows like loans, donations, and distributions.
The recent developments in South African legislation and regulations regarding trusts and beneficial ownership reflect a commitment to enhanced transparency and compliance. These changes are in line with international efforts to prevent financial crimes and tax evasion. Trustees and companies are now under stringent obligations to disclose detailed information regarding beneficial owners, making the management and administration of trusts more transparent and accountable. As these regulations take effect, entities and individuals involved in trust management must adapt to these new requirements to ensure full compliance and avoid severe penalties.
Not sure where to start? Secundes can help ensure that you comply with the new beneficial regulations. Contact us today for assistance: https://www.secundes.co.za/contact-us/
While every reasonable effort is taken to ensure the accuracy and soundness of the contents of this publication, neither the writers of the articles nor the publisher will bear any responsibility for the consequences of any actions based on information or recommendations contained herein. Our material is for informational purposes.