6-month opportunity for taxpayers to declare overseas income
Taxpayers with offshore assets need to disclose them to the South African Revenue Services (SARS) before time runs out.
There is an opportunity to voluntarily disclose overseas assets and income and any exchange control contraventions that occurred prior to February 29, in a special window period from October 1 2016 to March 31 2017.
This follows an announcement by the minister of finance in February.
Groenewald said the aim was to encourage compliance among South African taxpayers to give them the chance to get their house in order and regularise their exchange control affairs.
There are three substantial incentives to apply for relief under the special voluntary disclosure programme (VDP) in respect of offshore assets and income.
Interest accrued on offshore assets will only be charged from March 1, 2010 onwards. Also, if the application is successful, no under-statement penalties will be levied and SARS will not pursue criminal prosecution for this tax offence.
Another benefit is that 50% of the total amount applied for would be included in the taxpayer’s taxable income and subject to normal tax rates. If SARS is aware of a pending audit or investigation in respect of anyone’s foreign assets or foreign taxes, you would not be eligible to apply for the special VDP.
SARS will still accept a VDP application if the scope of the audit is for a different tax, for example, if you are applying for relief of income tax and SARS is conducting a PAYE audit. It should be remembered that the global standard for automatic exchange information between tax authorities will kick into gear in 2017 tax year.
Any amount which SARS obtained using the international exchange of information would not qualify for this special programme.
Levies would be charged on the assets declared, based on the current market value as of February 29. This would amount to 5% of the leviable amount if the funds were repatriated to South Africa, and 10% if kept offshore.
The levy must be paid from foreign-sourced funds. Should you wish to pay your levy from a South African-sourced fund, SARS will charge an additional 2% of the leviable amount. SRAS has made it clear that individuals would not be able to deduct their R10 million foreign capital allowance, or any remaining portion of it, from the leviable amount. The levy may not be reduced by any fees or commission.
The Financial Surveillance Department of the South African Reserve Bank (FinSurv) had taken a firm stand and that, if anyone wished to voluntarily make a full disclosure directly to them outside the framework of the special programme, then they would have to pay a settlement ranging from between 10 and 40% of the current market value of their unauthorised foreign assets.
Determination of the final settlement amount would also depend on whether you elected to retain your funds overseas or repatriate them.
It is worth bearing in mind that should a South African taxpayer not apply for this special VDP and SARS and FinSurv discover any undisclosed assets then they will face the full force of the law.
SARS and the South African Reserve Bank were working to ensure that these applications were assessed through one join process. Full details of the compliance requirements will be made public later in the year, as the window period for the VDP opens in October.
Reference:
Joseph Booysen – Business Reporter at Cape Argus