Individual taxpayers be warned: You cannot escape beneficial ownership reporting this filing season

Individual Taxpayers to Report 'Beneficial Ownership' Information in 2024 Tax Returns. Picture: Motshwari Mofokeng, Independent Newspapers.

Individual Taxpayers to Report 'Beneficial Ownership' Information in 2024 Tax Returns. Picture: Motshwari Mofokeng, Independent Newspapers.

Published Jul 1, 2024


By: Zasha de Lange

As the 2024 Income Tax Filing Season approaches, the South African Revenue Service (Sars) has implemented significant updates aimed at simplifying tax compliance.

Recently, Sars has increased its focus on the reporting of beneficial ownership information by company and trust taxpayers. Now, individual taxpayers are also subject to this requirement and must disclose Beneficial Ownership information to SARS.

On June 27, 2024, Sars announced updates for the 2024 Filing Season that require individual taxpayers engaged in partnerships to disclose Beneficial Ownership details on their 2024 personal income tax returns. This requirement extends to all partners involved in their business activities.

Why Sars Requires Beneficial Owner (BO) Information

The need for Beneficial Owner (BO) information is growing globally to combat tax evasion, money laundering, and other financial crimes. The requirement for BO information by Sars aligns with international standards and domestic laws aimed at promoting financial transparency and accountability.

In South Africa, the requirement for BO information is supported by various legislation:

· Companies Act, 2008 (Act No. 71 of 2008): Companies must disclose individuals who ultimately own or control a company.

· Trust Property Control Act, 1988 (Act No. 57 of 1988): Trustees must submit a beneficial ownership register to the Master of the High Court.

· Financial Intelligence Centre Act (FICA), 2001 (Act No. 38 of 2001): Requires institutions to identify and verify beneficial owners to prevent money laundering and terrorist financing.

Identifying beneficial owners can be tricky and is not always as clear-cut as it may seem. In partnerships, "Beneficial Owners" can include individuals, companies, or trusts, along with their underlying beneficial owners who ultimately control or benefit from the partnership.

Why Beneficial Ownership Matters

By identifying beneficial owners who ultimately benefit from an asset or income, Sars can accurately determine tax liabilities and prevent tax evasion. This also supports other authorities in investigating money laundering and other illicit activities, and in detecting and addressing cross-border tax evasion.

Ensuring that taxpayers fulfill their obligations in the appropriate jurisdictions and identifying beneficial owners is essential in enforcing tax compliance.

How This Affects You

By disclosing Beneficial Ownership information, taxpayers enhance transparency and accountability within the tax system. Failing to comply with Sars' Beneficial Owner (BO) reporting requirements may result in audits, heightened reporting obligations, and penalties.

Therefore, it is vital for taxpayers to stay updated on regulatory updates.

Seeking professional advice is crucial for navigating the complexities of identifying beneficial owners necessary for income tax return submissions and ensuring tax compliance. Expert guidance from tax professionals and legal advisors can offer clarity and support to ensure accurate reporting to Sars.

* de Lange is the manager: Trust and Deceased Estate Tax Compliance at Tax Consulting SA.