Missed the offshore tax deadline?

The Special Voluntary Disclosure Programme (SVDP) has come and gone. It afforded taxpayers a “final” opportunity to regularise their offshore assets – prior to Sars being made aware of these assets via the International Automatic Exchange of Information under the OECD Common Reporting Standard (CRS).

The SVDP was designed as a one shoe fits all, and the penalty based on the market value of the asset. It made no distinction between “pretax” and “post-tax” funds, and was capped at 16% of the highest value of the assets, regardless of the source.

It triggered Sarb similarly to offer SA residents the opportunity to regularise the exchange control position of their offshore assets.

Fortunately for South Africans, the SVDP isn’t the only route of regularisation. The “normal” Voluntary Disclosure Programme (VDP) is an open-ended one. Sars allows taxpayers to update their tax affairs retrospectively. The VDP is available to regularise tax defaults on local and offshore assets. The SVDP was limited to offshore assets.

Under the VDP taxpayers must re-open their tax returns and include the income and capital gains previously omitted. There’s no market value penalty. Generally, the penalties associated with non-compliance are waived and once the VDP application is submitted, applicants are shielded from criminal prosecution. Sars does, however, charge interest on the outstanding tax.

In 60%-70% of the cases, we’ve found the VDP results in a significantly lower bottom-line liability versus the SVDP, and is the route of regularisation best followed.

Sarb also provides a route of disclosure that SA residents can “walk through” to regularise the exchange control position of their assets abroad. These applications are submitted via an authorised dealer, directly to Sarb. South Africans are required to make a full, frank and verifiable declaration to Sarb.

Lizzie Fick is a Maitland associate