Trust Taxation Reform in South Africa: Striking a Balance Between Tax Neutrality and Effective Compliance (Lessons from the United Kingdom and the United States of America)

Abstract

South Africa's trust legislation revisions under the General Laws Amendment Act, 22 of 2022, intend to address international concerns highlighted by the Financial Action Task Force (FATF), most notably concerns affecting tax evasion and a lack of transparency around beneficial ownership. This research report examines trust legislative amendments, particularly the Trust Property Control Act (TPCA) 57 of 1988, as well as various other legislative acts in the trust sector. This research report further provides a comparative assessment of South Africa's trust legislative amendments against legislative measures utilized in the United Kingdom and the United States of America. This comparison is relevant given the diverse but well-established frameworks for dealing with trusts within these jurisdictions. The objective of this comparison is to find similarities and significant variances in how each nation taxes and regulates trusts. Aligned with the FATF's focus on addressing deficiencies in beneficial ownership transparency, this research report also examines the growing emphasis on beneficial ownership transparency from a worldwide context. In the broader context of this research, the comparison between the United Kingdom and the United States of America is relevant to highlight their regulatory procedures for ensuring tax neutrality and effective compliance in the trust landscape. South Africa's amendments to the Trust Property Control Act (TPCA) aim to enhance transparency around beneficial ownership. However, administrative and enforcement challenges may affect the overall effectiveness of these reforms. This research, through comparative analysis of the United Kingdom's Trust Registration Service (TRS) and the United States' Corporate Transparency Act (CTA), provides valuable insights for improving trust oversight in South Africa. The findings suggest that while adopting similar measures could strengthen South Africa's regulatory framework, adequate resource allocation for enforcement and ensuring trustee compliance are essential for achieving effective regulation. This research report contributes to the critical discussion on trust regulation mechanisms by analysing the delicate balance between overregulation and the need to implement appropriate safeguards against trust abuse