Budget 2016: New amnesty for tax dodgers with offshore assets

(Gallo)

(Gallo)

A new amnesty will allow tax dodgers to come off relatively lightly – if they fess up between October 2016 and March 2017.

“Time is now running out for taxpayers who still have undisclosed assets abroad,” Finance Minister Pravin Gordhan warned in his budget speech yesterday, before announcing the so-called special voluntary disclosure programme which will give non-compliant taxpayers an opportunity to voluntarily disclose offshore assets and income. It will also offer relief in light of exchange control contraventions.

Addressing the media on Wednesday, Gordhan said the programme offered an opportunity for people to become “a little more honest than they were before … and share a little more of their money with us”.

The pressure is on for those who have undisclosed assets abroad as a new global standard for the automatic exchange of information between tax authorities will be operational from 2017 – and will provide the South African Revenue Services (Sars) with additional information.

Gordhan could not put a number on the potential value of assets offshore but it likely runs into the billions, given that another amnesty in 2003 – as Business Day reported – resulted in R48-billion found to be held offshore illegally.

The programme will see Sars and the South African Reserve Bank working jointly to ensure applications are assessed through one joint process for both tax non-compliance and exchange control contraventions.

The special programme extends from an existing voluntary disclosure programme that since 2012 has offered amnesty from fines and criminal proceedings for those who disclose assets offshore. Individuals and companies can initially apply for amnesty with a “no-name” approach and successful applicants will be granted a number of reliefs under the programme.

Only 50% of the seed money to fund the acquisition of offshore assets (before March 1 2015) will be included in taxable income and subject to normal tax.

Investment returns on these assets prior to March 1 2010 will be exempt from taxation.

Interest on tax debts arising from seed money or returns will only commence from March 1 2010.

No understatement penalties will be levied.

The successful applicant will also be exempt from criminal prosecution.

Exchange control relief
Exchange control relief, under the special programme, will allow South African residents to disclose and regularise their exchange control contraventions that occurred prior to February 29 2016.

Applicants may still have to pay a levy based on the market value of their foreign assets or structures.

If the regularised assets or its sale proceeds are repatriated to South Africa the levy will be 5% of market value. If they are kept offshore the levy will be 10%.

Those who fully disclose after the deadline will pay a settlement ranging from 10% to 40% as decided by the Reserve Bank.

Those who don’t disclose could face the full force of the law meaning that, where appropriate, the Reserve Bank’s financial surveillance department can recover the full amount of the contravention.

Persons cannot apply for amnesty if they are aware of a pending or commenced audit or investigation in respect of foreign assets or foreign taxes. Amounts in respect of which Sars obtained information under the terms of any international exchange of information procedure will not be eligible for the special programme.

 
Lisa Steyn

Lisa Steyn

Lisa Steyn is a business reporter at the Mail & Guardian. She holds a master's degree in journalism and media studies from Wits University. Her areas of interest range from energy and mining to financial services and telecommunication. When she is not poring over annual reports, Lisa can usually be found pottering about the kitchen. Read more from Lisa Steyn

Comments

blog comments powered by Disqus

Client Media Releases

MTN scoops coveted international HR award
N2 coastal road in good shape
Skills that will help you get ahead in the workplace
FCM wins top award