Common reporting standards (CRS)
SARS is receiving information and now acting on the CRS automatic exchange of information with eighty-seven foreign jurisdictions concerning RSA taxpayers with offshore investments. Special voluntary disclosure program (SVDP) In anticipation of such offshore tax information, Act 13 of 2016 provided for an SVDP, which allowed taxpayers with undeclared assets and income to come clean and be granted a form of ‘amnesty’, subject to a levy.
Requests-for-information letters
Taxpayers with offshore investments are receiving letters initiating a review of their tax affairs, having regard to this information. Taxpayers are requested, under s 46(1) of the Tax Administration Act, to provide relevant information pertaining, amongst other things, to:
- Confirmation of the holding of offshore investments (including loans).
- Details of such investments, since 2015.
- Intermediaries who facilitated such investments.
- Source of the offshore investments.
- Whether the taxpayer has complied with disclosures of the offshore investments and income in their RSA tax returns.
Voluntary disclosure program (VDP)
In what appears to be a concessional gesture by SARS, errant taxpayers are invited to apply for VDP within twenty-one working days. This is an interesting approach, since it has been held in recent tax cases, including Purveyors, that a requirement for a valid VDP is that it must be voluntary, which it cannot be if a taxpayer is under specific (not just general) investigation on a specific matter.
Understatement penalty table (USP)
Column 5 of the USP provides for VDP after notification of an audit, with penalties ranging from 25% for no reasonable ground for tax position taken, to 50% for gross negligence, and 75% for intentional tax evasion. Column 5 must be contrasted with column 6 of the USP, which applies before notification of an audit and imposes zero penalties, save for 10% in circumstances of intentional evasion.
Thus the VDP olive branch extended by SARS, although unclear, probably does carry some penalties under Column 5 but is better than a non-VDP situation, in which a penalty of up to 200% for intentional tax evasion plus criminal prosecution would be at stake.