The three compliance pillars
Three pillars keep the structure standing: how the trustees conduct themselves, the transparency registers the law now requires, and the returns SARS expects. Company-law housekeeping sits alongside them.
Pillar 1 — trustee conduct
Trustees must act with real care and independence. The standard is set by statute and cannot be contracted away:
(1) A trustee shall in the performance of his duties and the exercise of his powers act with the care, diligence and skill which can reasonably be expected of a person who manages the affairs of another. (2) Any provision contained in a trust instrument shall be void in so far as it would have the effect of exempting a trustee from or indemnifying him against liability for breach of trust where he fails to show the degree of care, diligence and skill as required in subsection (1).
Note — Section 9 has not been amended — this is the original 1988 wording and is current. The duty cannot be diluted by a clause in the trust deed: s 9(2) makes any such exemption or indemnity void.
The practical lesson — appoint at least one genuinely independent trustee, hold real meetings, and minute real decisions — is covered in trustees’ duties.
Why this matters so much: where the founder keeps real control and the other trustees are mere figureheads, a court can treat the trust as the founder’s alter ego and disregard it. The Supreme Court of Appeal said the remedy is a genuinely independent trustee:
The same risk runs through the tax structuring. SARS — and the courts — will look past the paperwork to what the arrangement really is. The SCA put the substance-over-form test this way:
Pillar 2 — transparency registers
Since South Africa’s anti-money-laundering reforms, both the trust and the company must keep registers of who really stands behind them — two separate filings with two different regulators: the trust register at the Master (TPCA s 11A) and the company register at CIPC. Read the detail on beneficial-ownership registers.
The trust-side duty is on the trustee, inserted into the Trust Property Control Act by the 2022 anti-money-laundering reforms:
(1) A trustee must— (a) establish and record the beneficial ownership of the trust; (b) keep a record of the prescribed information relating to the beneficial owners of the trust; (c) lodge a register of the prescribed information on the beneficial owners of the trust with the Master’s Office; and (d) ensure that the prescribed information referred to in paragraphs (a) to (c) is kept up to date. (2) The Master must keep a register in the prescribed form containing prescribed information about the beneficial ownership of trusts.
Note — Section 11A was inserted by s 6 of the General Laws (Anti-Money Laundering and Combating Terrorism Financing) Amendment Act 22 of 2022, with effect from 1 April 2023.
The penalty for failing the trust beneficial-ownership duty is severe — these are not optional records:
A trustee who fails to comply with an obligation referred to in section 10 (2), 11 (1) (e) or 11A (1), commits an offence and on conviction is liable to a fine not exceeding R10 million, or imprisonment for a period not exceeding five years, or to both such fine and imprisonment.
Note — The offence sits in s 19 (“Failure by trustee to account or perform duties”), substituted by s 7 of Act 22 of 2022 (wef 1 April 2023). It is the failure to comply with s 11A(1) — the beneficial-ownership obligation quoted above — that triggers this penalty.
Pillar 3 — SARS reporting
SARS now receives detailed third-party data on trusts. A resident trust files an annual IT3(t) reporting every amount it vested in a beneficiary, plus its income tax return (ITR12T), and SARS matches the two. The rights conferred on beneficiaries — vested versus discretionary — drive the treatment. See SARS trust reporting.
SARS’s own guide draws the line between the two kinds of right:
A) Under a vesting trust the income or capital gain or assets of the trust are vested in the beneficiaries and the beneficiaries are said to have vested rights to the income or assets of the trust. The beneficiaries are the true owners of the trust capital and income, whilst the trustees are only empowered to administer the trust fund (in a Bewind trust). B) Under a discretionary trust, the trustees usually have the discretion as to whether and how much of the income or capital of the trust to distribute to the beneficiaries. In these circumstances, the beneficiaries merely have contingent/discretionary rights (hope or spes) to the income or capital of the trust (note: it is also not uncommon to find hybrid rights within a trust – this means that one trust instrument may include vested and discretionary rights).
Note — A “distribution” for IT3(t) purposes is, in the guide’s words, “amounts vested in the trust beneficiaries,” and “vesting … is an indispensable prerequisite for the distribution to occur.” All resident trusts must file an ITR12T regardless of activity.
The annual compliance cycle
- Hold genuine trustee meetings and minute real decisions; keep the trust bank account separate.
- Before any company distribution, apply and minute the solvency and liquidity test (Companies Act s 4).
- File the trust’s ITR12T and the IT3(t) by the SARS deadline; lodge any donations-tax returns.
- Keep the trust’s beneficial-ownership register (Master) and the company’s (CIPC) current.
- Review the structure yearly — the official rate of interest, the donations-tax exemption, beneficiary residency, and any change in the section 7C interpretation note.
The solvency and liquidity test the company must pass before distributing is set out in the Companies Act:
4. (1) For any purpose of this Act, a company satisfies the solvency and liquidity test at a particular time if, considering all reasonably foreseeable financial circumstances of the company at that time— (a) the assets of the company, as fairly valued, equal or exceed the liabilities of the company, as fairly valued; and (b) it appears that the company will be able to pay its debts as they become due in the ordinary course of business for a period of— (i) 12 months after the date on which the test is considered; or (ii) in the case of a distribution contemplated in paragraph (a) of the definition of ‘distribution’ in section 1, 12 months following that distribution.
Note — Section 4 defines the test for any purpose of the Act; the requirement that the board apply it before authorising a distribution is imposed by s 46. The test has two limbs — solvency (assets, fairly valued, equal or exceed liabilities) and liquidity (able to pay debts as they fall due for the next 12 months).
For the full build-and-run sequence, see the implementation checklist.
The compliance guides
Compliance & governance · 5 guides
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Compliance & governance
5 guidesTrust & Company Compliance· hub
The governance and transparency obligations that keep a structure standing.
Read guideBeneficial-Ownership Registers
Two filings: the trust register at the Master (TPCA s 11A) and the company register at CIPC.
Read guideSARS Trust Reporting
The annual IT3(t) and ITR12T returns, and how SARS matches them.
Read guideCompany-Law Housekeeping
Solvency & liquidity, financial assistance (ss 44/45) and director conflicts (s 75).
Read guideImplementation Checklist
A practical, ordered sequence for building the structure correctly.
Read guide
Frequently asked questions
The trust keeps its beneficial-ownership register current, files its IT3(t) and ITR12T, and runs as a genuine trust. The company keeps its CIPC filing current, passes the solvency and liquidity test before distributing, and keeps its records.
Because if the founder keeps real control, a court may treat the trust as the founder’s alter ego and disregard it — undoing the asset protection and the tax planning. Appoint an independent trustee and minute real decisions. See trustees’ duties.
Up to R10 million or five years’ imprisonment under the Trust Property Control Act; and a company cannot file its annual return without its CIPC beneficial-ownership filing. See beneficial-ownership registers.