As the South African Revenue Service (Sars) continues to sharpen its focus on trust tax compliance, offshore distributions are the latest area to come under increased scrutiny.

The latest development introduces an additional tax compliance requirement, effective from 16 October 2026, for South African resident trusts making distributions to non-resident trust beneficiaries.

This adds another important compliance consideration for trustees seeking to transfer funds to offshore trust beneficiaries.

The new requirement comes against the backdrop of growing compliance obligations for trusts in recent years, including expanded third-party reporting requirements and greater transparency over beneficiary distributions.

What Has Changed for Offshore Trust Distributions?

Historically, Sars did not approve the release of funds where South African resident trusts made distributions to non-resident trusts.

Sars subsequently clarified that it would consider approving such distributions, provided certain conditions are met.

From 16 October 2026, Sars has introduced the additional requirement that resident trusts must now also obtain a Tax Compliance Status (TCS) Good Standing confirmation when presenting their Manual Letter of Compliance (MLOC) to an authorised dealer for the transfer of funds offshore.

A Further Layer of Sars Oversight

While the relaxation of certain exchange control requirements by the South African Reserve Bank (SARB) has eased some restrictions on offshore transfers, Sars has maintained a separate approval process for trust distributions.

Sars has indicated that this is intended to manage the tax risks associated with these transactions, with particular emphasis on ensuring that the relevant tax obligations are met.

What Sars Will Consider Before Granting Approval

Sars has confirmed that approval will be considered only where:

• The non-resident trust is a beneficiary of the South African resident trust.
• The distribution complies with the provisions of the resident trust's trust deed.
• All tax liabilities associated with the distribution have been, or will be, settled.

Trustees must apply for a MLOC through Sars, with applications subject to verification and approval. The application must also be supported by relevant trust documentation and information substantiating the proposed distribution and its tax implications.

What Does This Mean for Trustees?

The latest requirement reinforces Sars' continued focus on trust compliance, particularly where funds are distributed to offshore trust beneficiaries.

While distributions to non-resident trusts may be approved, trustees need to consider the underlying tax implications, the provisions of the trust deed and the necessary Sars approvals before proceeding.

Given the compliance requirements involved, trustees considering offshore distributions are encouraged to seek assistance from a suitably qualified tax practitioner to assess the tax implications, navigate the Sars approval process and ensure that the necessary compliance requirements are met before funds are transferred.

Written by Roxshanna du Toit, Head of Trusts at Tax Consulting SA