The South African Revenue Service (SARS) has resumed issuing final demand letters to trusts with outstanding income tax returns. This brings an end to the temporary relief announced earlier in 2026 when administrative penalties previously imposed on non-compliant trusts were reversed.

Final demand letters issued in October 2026 indicate that SARS has recommenced its enforcement after concerns raised regarding the legal validity of the initial penalty process, led to the temporary reprieve. 

This time, the demands have been issued following the publication of the relevant public notice. Trustees should therefore not mistake the earlier reversals for an exemption from their statutory filing obligations.

Why Did SARS Reverse the Penalties?

In February 2026, SARS issued final demand letters to trusts with outstanding income tax returns for the 2024 and 2025 years of assessment, providing 21 business days to regularise their affairs.

Under sections 210 and 211 of the Tax Administration Act, 2011, fixed-amount administrative penalties must be supported by a public notice identifying the relevant incidence of non-compliance. Although the initial demands were issued in February, the applicable public notice, Notice 7314, was only published in Government Gazette No. 54417 on 27 March 2026.

This discrepancy raised questions about the validity of penalties imposed in reliance on demands issued before the enabling notice was published.

Following stakeholder consultations, SARS deferred the implementation of penalties to 4 May 2026. Nevertheless, penalties were subsequently imposed on certain trusts.

On 6 July 2026, SARS issued a Notice of Penalty Cancellation for trusts who were penalised for the non-submission of the 2024 and 2025 returns. While SARS did not expressly confirm the legal grounds for these reversals, industry concerns centred on the premature issuance of the original final demands.

SARS Is Clearly Moving from Warnings to Enforcement

Trust compliance has long been an area of concern for the tax authority, and it has repeatedly warned trusts and trustees of the obligation to meet their tax filing requirements. Trustees as representative taxpayers for a trust, have been given adequate notice and sufficient time to regularise their trusts’ affairs.

Under Notice 7314, trusts that fail to submit required income tax returns for years of assessment commencing on or after 1 March 2023 may face administrative penalties where SARS has issued a qualifying final demand and the outstanding return remains unsubmitted after 21 business days.

Penalties are determined under section 211 of the Tax Administration Act and range from R250 to R16,000 per month, depending on the applicable statutory penalty category. These may recur for up to 35 months while non-compliance continues.

The renewed demands therefore represent a significant development for trustees who may have assumed that the earlier reversals brought the matter to an end.

Trustees Should Act Without Delay

The latest development suggests that the hourglass is fast running out for trusts with outstanding income tax returns. 

Trustees should urgently review their trusts’ compliance status and submit any outstanding income tax returns within the prescribed 21-business-day period. They should also verify that previously reversed penalties have been removed from their SARS accounts. Where penalties are incorrectly imposed, the available remission and dispute resolution procedures should be considered.

Importantly, dormant or inactive trusts are not automatically exempt from filing obligations and should pursue formal deregistration where appropriate.

The Bottom Line

The penalty repeal provided temporary relief, but not immunity from future enforcement.

With SARS issuing fresh final demands under the published legal framework, trustees must prioritise compliance to avoid recurring penalties and unnecessary financial exposure.

The message is clear: while the earlier penalties were reversed, the underlying obligation to submit trust income tax returns remain unchanged.

Written by Sohail Arnoldus, Senior Tax Consultant at Tax Consulting SA