Pravin Gordhan, in his latest budget speech, referred to the new Voluntary Disclosure Programme. The Automatic Exchange of Information Agreement by the South African government has triggered a Voluntary Disclosure Programme ("VDP") by the South African Revenue Services ("SARS") and the South African Reserve Bank ("SARB"). Individuals and companies have now been granted an opportunity to disclose any offshore assets and income. The programme will run for a period of six months, starting from 1 October 2016 until 31 March 2017.
It is important to note that trusts do not qualify for the VDP but settlers, donors, deceased estates or beneficiaries of foreign trusts do qualify. According to the VDP, penalties will be waived but the following amounts will the subject to normal tax:
- 50% of the total amount used for the acquisition of the offshore asset before 1 March 2015 and;
- Investments returns derived from that offshore asset from 1 March 2010.
Exchange Control Relief
Unauthorised foreign assets or structures for Forex contraventions prior to 28 February 2016 can also be regularised by taxpayers. The application period will run for a period of six months, starting from 1 October 2016 until 31 March 2017.
A 5% levy is payable based on the market value of the asset if the regularised asset or the sale proceeds are sent back to South Africa; if it's kept offshore a 10% levy is payable. However, if the taxpayer has insufficient liquid foreign assets available to settle the levy and local assets are used to settle the levy, SARS will impose an additional 2% to the levy. Unfortunately, taxpayers will not be entitled to a R10 million foreign capital allowance.
Those taxpayers who do not take advantage of the VDP will be liable to pay a penalty ranging from 10-40% of the market value of the unauthorised foreign asset. The VDP seeks to encourage taxpayers to regularise their tax affairs.
It is crucial that taxpayers take note of the application period. Application forms can be accessed via the eFiling system.