Trust expert Phia van der Spuy warns trustees about the dangers of not having supporting documentation such as resolutions and loan agreements when it comes to trusts’ financial statements, especially regarding loan accounts. She cites the recent court case Taxpayer D v CSars (IT35476) which dealt with the question of whether the taxpayer had satisfactorily explained a large sum reflected as a loan account owing to him in one of his wholly owned companies. The Johannesburg Tax Court ruled against the defendant.
Often, unexplained loans to and from trusts are part of multiple complex transactions between different individuals and legal entities. This makes them risky from a SARS perspective, particularly as the recent changes to trust tax returns and a surge in verification letters from SARS focus on loan accounts to and from trusts. Phia provides four key lessons/guidelines for trustees to follow.
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Phia is a Chartered Accountant with a Masters’s degree in tax and a registered Fiduciary Practitioner of South Africa®, a Chartered Tax Adviser, a Trust and Estate Practitioner (TEP), and the founder of Trusteeze®, the provider of a digital trust solution.