A Special Voluntary Disclosure Programme (“SVDP”) was announced in the 2016/2017 Budget Speech to give non-compliant taxpayers the opportunity to voluntarily disclose their offshore assets and income. This is in light of the new global standard for automatic exchange of tax information between countries which will provide SARS with information from the year 2017.
The SVDP will provide for the disclosure of foreign assets and income as well as allow taxpayers to apply for relief for contravention of the provisions of the Exchange Control Regulations.
Where offshore assets and income are concerned, applications for relief under the SVDP will apply for a limited period of six months starting from 1 October 2016 ending on 31 March 2017. Individuals, companies, settlors, donors, deceased estates and beneficiaries of foreign discretionary trusts may apply for the SVDP. Trusts will not qualify for the SVDP.
Tax relief under SDVP:
- 50% of the total amount used to fund the acquisition of the offshore assets will be taxed (if such amount constitutes “pre-tax” money).
- Only investment returns (e.g. interest, dividends, capital gains) form 1 March 2010 onward will be taxed.
- Interest on tax debts arising from the pre-tax funding money and from the investment returns will commence from 1 March 2010.
The SDVP will also apply to Exchange Control contraventions that occurred before 29 February 2016. However, South African residents currently under investigation by the Financial surveillance Department of South Africa (“FinSurv”) will not qualify for Exchange Control relief under the SVDP. Applications for relief of Exchange Control relief under SVDP will commence on 1 October 2016 and close on 31 March 2017.
Successful applicants for Exchange Control relief may have to pay a levy based on the current market value of the foreign assets as at 29 February 2016.
The following percentages will apply:
- 5% of the leviable amount if the regularised assets or sale proceeds are repatriated to South Africa; and
- 10% of leviable amount if regularised assets are kept offshore.
The levy must be paid from foreign-sourced funds. Where insufficient liquid foreign assets are available and local assets are used to settle the levy, and additional 2% will be added to the levy.
Individuals will not be allowed to deduct their R10 million foreign capital allowance (or any remaining portion thereof) from any leviable amount.
South African residents who do not apply for Exchange Control relief under SVDP and opt to make disclosure voluntarily directly to FinSurv (outside of the SVDP) shall, at the discretion of FinSurv, pay a settlement ranging from 10% to 40% of the current market value of their unauthorised foreign assets.
South African residents who neither applied for Exchange Control relief in terms of the SVDP nor voluntarily approached FinSurv for regularisation may face the full force of the law. In this regard, FinSurv has been mandated to, where appropriate, recover the full amount of the contravention.