A trust is defined as the legal relationship created by a person (the founder) who places assets under the control of another (the trustee) for the benefit of specified persons (beneficiaries) or for a specified purpose.
Any distribution to the beneficiaries of the trust must be made in accordance with the provisions of the trust deed, which is a document containing all the rules of the trust.
Trust Classification
- An “inter vivos trust” is created during the lifetime of a person by way of an agreement (contract) between the founder and the trustee(s).
- A “testamentary trust” is set up in terms of the will of a person and comes into effect after their death.
- A “vesting trust” – a trust where income, capital gains or assets are vested to a beneficiary in terms of the trust instrument.
- A “discretionary trust” – a trust where the trustee(s) in terms of the trust instrument, has the right to vest income, capital gains, assets or retained amounts in that trust, to its beneficiaries.
- A “hybrid trust” – the majority of trusts in South Africa will have vested and contingent rights provided for in the trust instrument. In other words, a combination of the vesting trust and the discretionary trust mentioned above.
Trust Registration
Income tax for a trust can either be registered electronically or by visiting a SARS branch.
Supporting documents required:
1. Copy of the Letter of Authority to the trustee(s).
2. Copy of the Trust Deed. Copy of a Final Will / Testament.
3. Copy of a proof of identity of the Trustee who will act as the Main Trustee and be registered as the Representative taxpayer at SARS (also known as the Registered Representative)
4. Trust resolution stipulating / confirming the appointment of the “Representative Taxpayer (e.g. Main Trustee)” of the Trust.
5. Proof of a business address of a Trust.
6. Proof of residential address of the Representative Taxpayer.
7. IT77TR – Application for registration of a trust form.
Deregistering a Trust
In order to deregister the trust, the Master must be satisfied that the trust has no remaining assets, the beneficiaries have received what is due to them and that the trust’s bank account has been closed. The Master will then confirm that the trust file is closed and instruct the trustees to abide by Section 17 of the Trust Property Control Act, which states the following:
“A trustee shall not without the written consent of the Master destroy any document which serves as proof of the investment, safe custody, control, administration, alienation or distribution of trust property before the expiry of a period of five years from the termination of a trust.”
Once the Master has confirmed that the trust has been terminated, the Master’s letter must be provided to SARS together with further supporting documents in order to have the trust deregistered as a taxpayer with SARS.
