Do you have undis­closed for­eign as­sets?

Finweek English Edition - - Cover Story -

Tax­pay­ers who are still un­de­cided on whether to make use of the win­dow of op­por­tu­nity to dis­close un­de­clared off­shore as­sets and in­come are fast run­ning out of time.

Those who do not make use of the Spe­cial Vol­un­tary Dis­clo­sure Pro­gramme (SVDP) may open them­selves up for mas­sive penal­ties and even crim­i­nal pros­e­cu­tion.

The world has changed since the last amnesty given to tax­pay­ers in 2003. Start­ing this year, Sars will be able to au­to­mat­i­cally ex­change in­for­ma­tion with sev­eral other tax ju­ris­dic­tions.

Glob­ally, banks and fi­nan­cial in­sti­tu­tions will be obliged to share ac­count and fi­nan­cial in­for­ma­tion of their for­eign clients in terms of the new Com­mon Re­port­ing Stan­dard (CRS).

Tax­pay­ers have un­til 31 Au­gust to shed light on their deal­ings off­shore.

Mait­land as­so­ciate Nel Schoe­man says there is some time left, but the more com­plex a tax­payer’s af­fairs, the more dif­fi­cult it is go­ing to be to sub­mit a com­plete ap­pli­ca­tion in time.

Sars re­quires that the tax­payer ob­tain the to­tal un­de­clared off­shore as­set value for each year from 2011 to 2015. Those bal­ances have to be con­verted to rand un­der the his­toric ex­change rate. Sars then re­quires the tax­payer to in­clude 40% of the high­est rand value of those five years into the tax­payer’s 2015 tax re­turn as tax­able in­come.

That would in most cases push the tax­payer into the 40% tax bracket if they are not al­ready taxed at that rate. This means the tax­payer pays 40% on 40% of their in­come, which amounts to an ef­fec­tive 16% penalty.

“A big point of frus­tra­tion is that peo­ple do not con­sider the time it takes to ob­tain the ap­pro­pri­ate in­for­ma­tion nec­es­sary to make a full dis­clo­sure,” says Schoe­man.

The Swiss bank­ing sys­tem, for ex­am­ple, has been stream­lined to ac­com­mo­date this process. How­ever, it is al­most im­pos­si­ble to get in­for­ma­tion in the right for­mat from many other coun­tries. They sim­ply do not have the sys­tems in place to ac­com­mo­date our tax cal­cu­la­tions.

Ernest Mazan­sky, mem­ber of the in­ter­na­tional tax com­mit­tee of the South African In­sti­tute of Tax Pro­fes­sion­als, says it is typ­i­cal of South Africans to wait un­til the last minute. That said, the de­lays war­rant some un­der­stand­ing be­cause the fi­nal rules only be­came clear at the be­gin­ning of the year.

“It is not al­ways easy to get the re­quired in­for­ma­tion in the pre­scribed for­mat from the for­eign banks and in­sti­tu­tions,” he adds.

Sars and the Fi­nan­cial Sur­veil­lance De­part­ment of the South African Re­serve Bank (FinSurv) were quite un­der­stand­ing dur­ing the 2003 amnesty and 2010 Vol­un­tary Dis­clo­sure Pro­gramme.

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