The South African Revenue Service (Sars) is no longer merely modernising; it is actively tightening the net around trusts to ensure greater transparency, accuracy, and compliance. For trustees, tax practitioners, and other representatives, the 2025 season introduces more stringent obligations that cannot be overlooked.

The common thread running through the changes is clear: Sars is closing compliance gaps. Whether through limiting the flow-through principle, enforcing beneficial ownership disclosures, or embedding automated checks in the ITR12T, the expectation is that trustees will exercise greater diligence than ever before.

The long-awaited Sars Stakeholder Letter for Trusts confirms Sars’s strategic direction and highlights focus areas for 2025. It outlines both legislative updates and critical changes to the ITR12T return. Below is an overview of the proposed updates.

Legislative Updates

Definition of a Trust

The statutory definition of a “trust” has been updated to explicitly include:

• Portfolios of collective investment schemes
• Portfolios of hedge fund collective investment schemes

Section 6quat – Foreign Tax Credits

Effective 1 March 2025, section 6quat has been expanded to provide:

• Full use of foreign tax credits for taxes paid on capital gains in foreign jurisdictions.
• Carry-forward of unused foreign tax credits for up to six years.
• Clarification that residents may claim credits against South African tax for irrecoverable foreign taxes paid on foreign-sourced capital gains.

Section 12H – Learnership Agreements

The learnership allowance under section 12H has been extended until 31 March 2027.

Section 25B – Flow-Through Principle Limited

The flow-through principle (whereby income retains its nature when vested in a beneficiary) is now restricted to resident beneficiaries only. The effective date of the is amendment is 1 March 2024.

• Any amounts vested in non-resident beneficiaries will be taxable in the trust itself.
• This amendment also impacts provisional tax calculations (IRP6).

ITR12T Form Enhancements

Sars has modernised the ITR12T return to strengthen data accuracy and streamline submissions.

Farming and Partnership Farming Auto-Calculator

• Automatic calculation of farming income and expenses.
• Pre-population of IT48 and IT48V balances.
• Improved reporting for farming operations and partnerships.

Wizard Questions and New Features

• Section 25B(4)–(6): Trustees must indicate if vested amounts fall under loss-limitation provisions.
• Flow-Through of Capital Losses: The form now accommodates bewind and vesting trusts where exceptions apply.
• Special Trusts (Type b): Trustees must confirm that the youngest beneficiary is under 18 at year-end.
• Beneficial Ownership Enhancements:
  • Deceased founders – tick-box provided.
  • Unnamed beneficiaries (classes of beneficiaries) – free text box for disclosure.

Conclusion

The 2025 Trust Income Tax Season reflects Sars’s intensified focus on modernisation, transparency, and enforcement. For trustees and tax practitioners, these developments bring both challenges and opportunities.

By staying informed, diarising deadlines, and applying the updated legislative provisions, trustees can safeguard compliance and optimise tax outcomes, while demonstrating responsible fiduciary management in an environment where Sars is watching closer than ever.

Written by Sidney Fletcher, Senior Manager Trust and Deceased Estate Tax Compliance at Tax Consulting SA