South African SVDP in respect of offshore assets and income

South African SVDP update

Johan van der Walt provides an update on the South African Special Voluntary Disclosure Programme in respect of offshore assets and income.

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Associate Director

KPMG in South Africa

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On 24 February 2016, the South African Minister of Finance in his Budget Speech announced the introduction of a Special Voluntary Disclosure Programme (SVDP). This gives another opportunity for non-compliant South African taxpayers and Exchange Control (Excon) residents with undisclosed assets abroad to regularise those offshore assets as well as the income derived from same.

The SVDP legislation was promulgated in early 2017. The effective date of the SVDP is deemed to be 1 October 2016 and the application window closes on 31 August 2017. 

Global automatic exchange of information

The global automatic exchange of financial information between tax jurisdictions (known as Common Reporting Standard (CRS)) means that detailed financial information would automatically be shared between jurisdictions on an annual basis as from September 2017, assisting governments to reduce the possibility for tax evasion. 

The SVDP thus gives non-compliant South African taxpayers and Excon residents a final chance to 'come clean' regarding past non-declaration of off-shore income and Excon transgressions. 

Eligible SVDP Tax applicants

The SVDP Tax is open only to individuals and companies. Trusts do not qualify for the SVDP Tax, but settlors, donors, deceased estates and beneficiaries of foreign discretionary trusts may participate in the SVDP Tax, provided they elect to have the trust’s offshore assets and income deemed to be held by them personally for tax purposes.

Persons may not apply for the SVDP Tax if they are aware of a pending audit or investigation in respect of foreign assets or foreign taxes or where an audit or investigation in respect of foreign assets or foreign taxes has commenced already. (Note, this exclusion from the SVDP is not absolute, and depends on the actual scope of the audit or investigation underway.)

SVDP Tax relief (administered by SARS)

The SVDP Tax dispensation, administered by the South African Revenue Service (SARS), operates as follows:

  • The undeclared off-shore income not previously declared, is exempted from income tax, donations tax and estate duty that would have applied had such income been properly declared in the past year of assessment.
  • 40 percent of the highest value of the aggregate of all assets situated outside South Africa between 1 March 2010 and 28 February 2015 derived from undeclared income is included, however, in taxable income and subjected to tax in South Africa. (The 'highest value' is the market value determined in the relevant foreign currency and translated to the South African Rand at the spot rate at the end of each year of assessment).
  • There will be no understatement penalties and SARS will not pursue criminal prosecution.

The CRS and the risk of 'data-theft' (information paid for handsomely by revenue authorities) probably means that the days of 'ducking-and-diving' for erstwhile and current South African tax and Excon residents will soon be over. Should you wish to understand more regarding the South African SVDP and the regularisation opportunities available, please get in touch.

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