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.
The global automatic exchange of financial information between tax jurisdictions (commonly known as the Common Reporting Standard (“CRS”)) means that detailed financial information would automatically be shared between jurisdictions on an annual basis as from September 2017.
The CRS will assist governments to reduce the possibility for tax evasion by providing for the exchange of non-resident information with the tax authority in the taxpayer’s country of residence.
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.
The SVDP application process is identical to that of the existing Voluntary Disclosure Programme, i.e. on-line via the SARS e-filing system. This also applies for SVDP Excon applications.
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.)
The SVDP Tax dispensation operates as follows:
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. Applications may be made in a personal or representative capacity, but any application made in a representative capacity would require proof of authority.
Any party involved in an Excon matter currently under investigation by the Financial Surveillance Dept. (“FinSurv”) of the South African Reserve Bank (“SARB”) cannot apply for Excon relief under the SVDP.
According to the Circular 06/2016, FinSurv may grant SVDP Excon relief (so-called “administrative relief”) on the following basis:
The Circular also provides for the unwinding of so-called “loop structures” i.e. where foreign assets or the proceeds thereof 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 and there is then no need to apply through the SARS eFiling platform. Examples of this are:
Disclosures relating to the above will in most instances not attract any levy, but merely require a full declaration to an Authorise Dealer.
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 with KPMG’s resident SVDP expert based at the KPMG Canberra office.
Johan van der Walt was instrumental in launching SARS’ original Voluntary Disclosure Program during 2010 and he was directly involved in initiating and conceptualising the current SVDP. His contact details are:
Johan van der Walt
Mobile +61 (0) 43 775 9384
© 2018 KPMG Services (Pty) Limited, a South Africa private company and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved.
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