On 27 February Sars committed to the automatic exchange of tax information with the revenue authorities of over 50 other jurisdictions under the Organisation for Economic Co-operation & Development (OECD) Common Reporting Standard (CRS) by September 2017.
The number of committed jurisdictions will grow to over 100 by September 2018.
This development is part of an international initiative to assist revenue authorities around the world to ensure everybody pays the right amount of tax on their income.
The Global Forum on Transparency and Exchange of Information for Tax Purposes, which monitors the implementation of standards of transparency and exchange of information, has a membership of 139 jurisdictions.
The adoption of the CRS by South Africa obliges a number of Reporting Financial Institutions to report specific information of clients that are not tax-resident in South Africa to Sars by 31 May 2017.
The CRS furthermore sets out what financial account information should be reported to Sars, the different types of accounts and taxpayers that are covered, as well as common due diligence procedures to be followed by financial institutions.
Financial information that is required includes interest, dividends, account balances, income from certain insurance products, sales proceeds from financial assets and other income generated with respect to assets held in the account or payments made with respect to the account.
As the CRS provides for the reciprocal exchange of information, it means that Sars will simultaneously receive financial information of South African tax-resident taxpayers from revenue authorities in other jurisdictions that have committed to the CRS.
Sars Commissioner, Tom Moyane has welcomed the development as a major breakthrough to stem illicit financial outflows.
“The implementation of the Standard is regarded as a significant and ambitious step in the field of administrative co-operation between revenue authorities to enhance compliance and fairness in tax. It was necessitated, amongst others, by free financial flows in the globalised arena which enables businesses and individuals to invest their wealth in financial institutions in jurisdictions outside their country of residence,” said Moyane.
The data, relating to the financial year 01 March 2016 to 28 February 2017, that Sars receives will then be re-packaged by Sars and transmitted to all the relevant revenue authorities by September 2017.
A Special Voluntary Disclosure Programme (SVDP) has commenced giving non-compliant taxpayers an opportunity to regularise their unauthorised foreign assets and income by voluntary disclosing this information. Individuals and companies can apply during the window period from 1 October 2016 until 31 August 2017.
The SVDP is meant for individuals and companies who have not in the past disclosed tax and exchange control defaults in relation to offshore assets.
Taxpayers can access all information about SVDP on the newly launched SVDP page.
Financial institutions are urged to ensure their systems are ready to submit by 31 May 2017. Details about which financial institutions are obliged to report information, and what information is required are on this website.
Sars also wishes to advise taxpayers that they may be contacted by their financial institutions to declare their tax residence in South Africa or in another jurisdiction. It is a requirement of the Tax Administration Act, 2011 to provide this information to their financial institutions. Taxpayers with a financial account overseas may also be contacted by their financial institutions overseas to provide evidence of tax residence.