The Common Reporting Standard (CRS) was developed by the OECD (Organisation for Economic Co-operation and Development) and provides a global standard for the automatic exchange of information relevant to tax between different tax jurisdictions. South Africa also agreed to comply with the CRS as from 2017.
With this in mind, a Special Voluntary Disclosure period for South Africans with unauthorised assets abroad came into effect for a limited period of time from 1 October 2016 until 30 June 2017.
It offers an opportunity to South African residents to regularise their unauthorised foreign assets by making a voluntary disclosure application to a special unit. This unit will be known as the Special Voluntary Disclosure Programme (SVDP) Unit – a unit to be jointly operated by the South African Reserve Bank (SARB) and the South African Revenue Services (SARS).
Who can apply for the relief
The SVDP penalties applicable
The applicant must include 40% of the highest value of the unauthorised assets situated outside South Africa between 1 March 2010 and 28 February 2015 (established as at the end of each year) in its taxable income, for the year of assessment ending 28 February 2015.
The applicant can elect to repatriate the unauthorised foreign asset or leave it abroad. Should it be repatriated, a levy equal to 5% (five percent) of the value of the unauthorised asset as on 28 February 2016 shall be raised. If the asset is left offshore, a levy of 10% (ten percent) of the market value of the foreign asset will be payable. The levy must be paid from offshore funds, otherwise, a further 2% (two percent) penalty will be added.
The SVDP relief granted
SARS will not pursue a criminal prosecution for a tax offence where an application in terms of the SVDP is successful.
Investment earnings and other taxable events prior to 1 March 2015 will be exempt from tax and no underestimation penalties will be levied. Interest on the amount payable will, however, will be levied as from 1 March 2015. Future income will be fully taxed and assets disclosed; will be subject to future capital gains tax, donations tax and estate duty which may become applicable, should the applicant dispose of or donate the disclosed asset or pass away while holding it.
The donor or beneficiary may elect that the unauthorised foreign asset so held by the non-resident discretionary trust, be deemed to be held by that person. This will have future income tax, donations tax, capital gains tax and estate duty consequences for such an individual.
The South African residents who do not apply for relief under the SVDP runs the risk of criminal penalties and that SARB may recover the full amount of the contravention as a penalty from the person in question, as opposed to the levies raised in accordance with the SVDP.
How to apply
SVDP applications must be submitted by using the SARS e-filing platform.
Important dates to remember
The way forward
Should you be unsure as to whether you will qualify to apply for the SVDP, it will be possible to submit an anonymous application and request a non-binding opinion regarding the eligibility for relief. Please contact Exceed for further information.