In order to introduce the legislative amendments required to implement the tax proposals announced in the 2015 National Budget, on July 22 2015 the National Treasury published the 2015 draft Tax Administration Laws Amendment Bill for public comment. One important proposal relates to greater tax transparency and the automatic exchange of information between tax administrations in various jurisdictions in order to counter cross-border tax evasion and aggressive tax avoidance.
Section 32 of the draft bill proposes the insertion of a definition of 'international tax standard' in Section 1 of the Tax Administration Act (28/2011), to mean "an international standard as specified by the Commissioner by public notice for the exchange of tax-related information between countries".
The National Treasury indicated that this definition was inserted to implement a scheme under which the South African Revenue Service (SARS) may require South African financial institutions to collect information under an international tax standard, such as the Organisation for Economic Cooperation and Development Standard for Automatic Exchange of Financial Account Information in Tax Matters.
The above standard encompasses the Common Reporting Standard that was endorsed by the G20 finance ministers in 2014. In order to ensure the consistency and efficiency of this standard, certain financial institutions must report on all account holders and controlling persons, irrespective of whether there is an international tax agreement between South Africa and their jurisdiction of residence or whether such jurisdiction participates in the Common Reporting Standard.
This reporting requirement will ease the compliance burden on reporting financial institutions, as they would otherwise have to change their systems and collect historical information each time that South Africa concluded a new international tax agreement or a jurisdiction was added to the Common Reporting Standard. Under the proposed amendment, all reporting financial institutions will be obliged to obtain the information and provide it to SARS. In addition, financial institutions will have to comply with the relevant data protection laws.
In order to give effect to the proposed implementation of the international tax standard, Section 37 of the draft bill proposes the amendment of Section 26 of the Tax Administration Act. Section 26 enables the commissioner of SARS, by public notice, to require third parties to submit returns for a party with which they transact – that is, employers, banks and asset managers of the taxpayer.
The draft bill proposes the insertion of a new subsection into Section 26 of the Tax Administration Act. The Section 26(3) provides as follows:
"The Commissioner may require a person to register as a person required to submit a return under this section, an international tax agreement or an international standard for exchange of information."
The intention of the proposed amendment is to ensure that the relevant financial institutions register with SARS in order to comply with international tax standards. In turn, the registration will assist SARS in the administration and the enforcement of international tax standards.
Public comments on the proposed amendments are due by close of business on August 24 2015.
For further information on this topic please contact Heinrich Louw at DLA Cliffe Dekker Hofmeyr by telephone (+27 11 562 1000) or email (firstname.lastname@example.org). The DLA Cliffe Dekker Hofmeyr website can be accessed at www.cliffedekkerhofmeyr.com.
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