OPPORTUNITY TO DISCLOSE ASSETS ABROAD
The Common Reporting Standard (CRS) was developed in response to the G20 request and approved by the OECD Council in July 2014. It calls on jurisdictions to obtain information from their financial institutions and exchange that information with other jurisdictions on an annual basis. It sets out the financial account information to be exchanged, the financial institutions required to report the different types of accounts, and taxpayers covered, as well as common due diligence procedures to be followed by financial institutions.
As cross-border activities become the norm, tax administrators need to work together to ensure that taxpayers pay the right amount of tax to the right jurisdiction. The South African Treasury and South African Reserve Bank are therefore offering a window period of 9 months to regularise affairs with regard to undeclared offshore assets, which includes gray money. Gray money is money that one derives from tax evasion and includes funds hidden in an offshore bank account. The Special Voluntary Disclosure Programme (SVDP)will apply to companies and individuals, but not to trusts. Settlors’ donors, deceased estates or foreign beneficiaries of offshore discretionary trusts can also participate in the programme if they are willing to have the trusts offshore assets and income deemed to be held by them.
The South African Revenue Services (SARS) will provide relief as follows:
Treasury has warned that those that do not avail themselves of the offer will be subject to the full force of the law. Applications must be made pursuant to the provisions of Regulation 24 of the Excon Regulations. Penalties ranging from 10% to 40% could potentially be imposed.
Applicants who are granted administrative relief in respect of the unauthorized foreign assets may pay a levy based on the current market value as at 29 February 2016.
The R10 million foreign capital allowance may not be used to settle the levy. The application process will close on 31 August 2017.
SIT BACK AND HOPE SARS DOES NOT INVESTIGATE YOUR OFFSHORE FUNDS OR BE PROACTIVE
Taxpayers with concealed funds abroad run the risk of investigations by SARS. With the recent release of the Panama Papers, it is evident that the Minister of Finance is tightening the noose on offshore tax planning structures. SARS will only need your name to launch an investigation into your offshore affairs and a list of taxpayers with offshore interests are expected to be released soon. The new provisions in the Tax Administration Act (TAA) allow SARS to deny a taxpayer access to the SVDP, simply by issuing a notification via e-filing. Therefore, residents who are the subjects of current and/or pending investigations will not qualify for relief under the SVDP.
WHEN TO START
We believe that taxpayers need to start now! To claim the benefits offered, taxpayers will need to submit extensive supporting documentation, which most won’t have before the beginning of this disclosure period. We believe it is best to start the data collection process and calculations now, with the anticipation of submitting it when the SVDP opens. PW Harvey & Co has assisted clients in the previous VDP periods and has the expertise and knowledge to assist clients with the current SVDP offered by SARS and SARB.
Once an application has been successfully submitted and agreement entered into, what to do with the funds in terms of investment is the next step.
PW Harvey & Co have for many years been successful in assisting clients with their offshore investments. We have the experience and expertise to assist you in taking care of your offshore investments in the most tax efficient way. We manage over R300 million of clients’ direct offshore investments, be that via unit trust, shares or multi asset wealth portfolios.
Get started now and contact our team for advice.
For more information and enquiries, please contact:
Michael Pasio – firstname.lastname@example.org/041 373 2710