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Taxation
Sunday, August 1, 2010
Voluntary programmes

The South African Reserve Bank (SARB) and the South African Revenue Service (SARS) have jointly announced voluntary disclosure programmes. These are both intended to run from 1st November 2010 until 31st October 2011.

The SARB programme will allow for exchange control contraventions to be regularised. It will be open to individuals and legal entities – which is wider than the last exchange control amnesty. The SARB programme includes three categories of contravention. The first comprises the contraventions of specified provisions, applicable to either individuals or legal entities. For instance, legal entities can regularise contraventions of reporting requirements or unauthorised foreign investments that accord with exchange control policy. This category simply requires disclosure and no levy will be payable.
The second category of contravention involves loop structures and the holding of foreign assets through offshore trusts. A loop structure will have to be unwound within a 180-day period. A levy equal to 10% of the funds involved in the loop structure will also have to be paid. The funds involved are those used to establish the structure, those exported from South Africa through the structure and the growth in value of the exported funds.
A South African donor to an offshore trust can regularise exchange control contraventions relating to that trust’s acquisition of foreign assets. That donor will then be deemed to hold the foreign assets himself. A levy equal to 10% of the value of the foreign assets will have to be paid. There is no repatriation requirement.
The third type of contravention is a general one, covering contraventions not specifically included in the first two categories. These contraventions would include the unauthorised holding of foreign assets. There will not be repatriation or unwinding requirements in this category. There will be a levy payable, based on the value of foreign assets or, if none remain, the amount exported. If the levy is paid from foreign funds, the rate will be 10%. If it is paid from South African funds, the rate will rise to 12%.
The SARS voluntary disclosure programme is widely framed. It applies to all taxpayers and all tax types. Although it can be applied in conjunction with the SARB programme it is not formally linked to it. It does not result in any reduction of the tax payable, but rather a waiver of interest, additional tax and penalties. There will also be immunity from criminal prosecution. SARS cannot already have been aware of the default disclosed, although there are provisions to deal with audits in progress.
The SARB and SARS programmes both contain provisions for non-binding opinions to be sought anonymously. By Tim Desmond, Director - Tax and Commercial Departments Garlicke & Bousfield Inc
 

Copyright © Insurance Times and Investments® Vol:23.8 1st August, 2010
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