PKF South Africa

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31 Jan 2017

A Special Voluntary Disclosure Programme has been introduced to allow South Africans to regularise any undisclosed foreign assets, the programme will run for a period of 11 months commencing on 1 October 2016 and ending on 31 August 2017. The legislation in this regard had been finalised by parliament on 16 December 2016 and was promulgated on 19 January 2017.

Whilst this programme is only applicable to South African individuals and companies, settlors, donors, deceased estates and beneficiaries of a foreign discretionary trust may participate if they elect to have the trust’s offshore assets and income deemed to be held by them.

Applications are also open to taxpayers who do not have assets situated abroad post 1 March 2010 but are concerned that they may be identified by the South African Revenue Service.

Tax Implications - South African Revenue Service

  • The undeclared income, in other words the amount used to fund the foreign asset will be exempt from income tax, donations tax and estate duty.
  • Only 40% of the highest aggregate value of all assets outside of South Africa on 28 February 2011 to 28 February 2015 that were derived from the undeclared income will be taxable in the 2015 tax period.
  • For the purposes of determining capital gains or losses, the asset held and not disposed of on the last day of the year ending on or before 28 February 2015, will be deemed to have been acquired on that day at a cost equal to market value resulting in a “step-up” of base cost. However please note that upon ultimate disposal of the asset the base cost will be limited to the proceeds on disposal less any allowable expenses.
  • Investment earnings prior to 1 March 2015 will be exempt from tax.
  • Interest on tax liabilities arising from the disclosure will commence from the 2015 year of assessment.
  • The programme provides for relief from understatement penalties and criminal prosecution. 

Exchange Control Implications – South African Reserve Bank

  • Applicants who are granted relief in respect of unauthorised foreign assets are subject to a levy based on the market value as at 29 February 2016.
  • The levy will be 5% if the assets or the proceeds are repatriated to South Africa and 10% if the assets are kept offshore.
  • The levy must be paid from foreign-sourced funds. Where insufficient liquid foreign assets are available, the levy is increased by a further 2%, to the extent that local assets are utilised to settle the levy.
  • Individuals will not be allowed to deduct their R10 million foreign capital allowance or any remaining portion thereof from any leviable amount and the levy may not be reduced by any fees or commissions.

PKF Comment: South African taxpayers should take advantage of this programme to regularise their foreign assets as the automatic exchange of information agreements will come into effect from September 2017 and will allow the South African Revenue Service to obtain full details of assets held by South Africans in various countries.

For further information or advice concerning South African taxation please contact Kubashni Moodley at [email protected] or call +27 31 573 5000.

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