South African SVDP and Exchange Control Residents

South African SVDP and Exchange Control Residents

Johan van der Walt provides an update on the Special Voluntary Disclosure Programme in respect of non-compliant South African Exchange Control residents with undisclosed assets abroad.

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South Africa’s Special Voluntary Disclosure Programme (SVDP), now well underway, gives another opportunity for non-compliant South African Exchange Control (Excon) residents with undisclosed assets abroad to regularise those offshore assets.

Eligible SVDP Excon applicants

The SVDP Excon allows South African individuals, sole proprietorships, partnerships, deceased estates, insolvent estates, South African trusts, close corporations and companies and former Excon residents to disclose their foreign assets held in contravention of the Excon Regulations 1961. Any party involved in an Excon matter currently under investigation by the Financial Surveillance Department (FinSurv) of the South African Reserve Bank (SARB) cannot apply for Excon relief under the SVDP.

SVDP Excon relief (administered by FinSurv)

According to the Circular 06/2016, FinSurv may grant SVDP Excon relief (so-called 'administrative relief') on the following basis:

  • the unauthorised foreign asset must have been held on or before 29 February 2016
  • a levy will be payable on the market value of the above-mentioned asset as at 29 February 2016 for example:
    • 5 percent if such assets are repatriated to South Africa 10 percent where the assets are retained abroad.
    • 12 percent in circumstances where the 10 percent levy cannot paid from foreign-sourced funds.
    • an applicant cannot deduct any unutilised Excon allowance from the levy payable. The levy may also not be reduced by any fees or commissions and must be paid within three months from notification by FinSurv.
    • should the applicant have unauthorised foreign assets in multiple foreign currencies, those foreign currency amounts could be converted to United States Dollar (USD), using the rate of exchange as at 29 February 2016.

The Circular also provides for the unwinding of so-called “loop structures” i.e. where foreign assets had been re-invested ('looped” back') into South Africa. This area is complex and the SARB has provided detailed guidance in this regard.

Certain Excon transgressions could be regularised through 'administrative relief outside of the SVDP'. In such cases the disclosure would be made to FinSurv via an Authorised Dealer in foreign exchange. Examples of this are:

  • immigrants, in possession of any foreign assets, should have declared that they will not place such assets at the disposal of any third party normally resident in South Africa. Such belated declaration can now be made before 31 August 2017.
  • residents who became entitled to a foreign inheritance from a bona-fide non-resident estate with foreign assets prior to 17 March 1998, were required to declare such foreign assets to FinSurv. Such declaration is now possible prior to 31 August 2017.
  • a South African resident who earned income abroad prior to 1 July 1997 was required to have repatriated such foreign income back to South Africa. Such income can now be declared to FinSurv via an Authorised Dealer before 31 August 2017.

Disclosures relating to the above will in most instances not attract any levy, but merely require a full declaration to an Authorised Dealer.

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