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National Treasury yesterday published the revised 2016 Draft Rates and Monetary Amounts and Amendments of Revenue Laws (Administration) Bill. It’s a mouthful and most likely doesn’t make sense to anyone other than the lawyers administering it, and tax gurus.
But inside this bill, lies Treasury’s revised Special Voluntary Disclosure Programme, which is an opportunity for non-compliant taxpayers to disclose offshore assets and income before a new global standard commences in 2017.
The tax wizard with a gift for the pen, Matthew Lester, makes sense of this in the contribution below. He can’t give general advice, but warns that those don’t come forward before the window closes could face criminal charges. This is also still a proposal so is not cast in stone just yet. – Stuart Lowman
By Matthew Lester*
One has to ask the question ‘what more has National Treasury and SARS got to do to encourage the taxpayer to clean up on their illegally held offshore investments?’
This is presuming of course that the latest proposals of 20 July 2016 are finally passed into law. They remain in draft form until enacted by parliament later this year. But it is fair to predict that the Special Voluntary Disclosure will go ahead from 1 October 2016.
The previous version was awfully cumbersome involving the resubmission of tax returns back to 2010 and the calculation of a seed capital adjustment to cover years prior to 2010. Any improvement on that is most welcome.
The latest proposal is based on a one-off levy calculated by adding 50% of the highest aggregate value of the offshore assets (2010 to 2015) to taxable income in the 2015 year of assessment, but with no resubmission of previous tax returns. (at least that’s how I read it at present).
The end result is that taxpayers with highest marginal tax rate will forfeit around 20% of their stash. That will dispense with arrear income tax, donations tax and estate duty transgressions. But this does not include a further levy to cover any exchange control transgressions, a further 5% or 10% of capital.
Read also: Matthew Lester: Round 1 – Sanitising the offshore stash
As with the previous proposals offshore trusts cannot apply. But their donors and beneficiaries may elect to apply on behalf of the offshore trust. In short, the trust can stay in place provided the taxpayer pays the tax in the future. This may well disturb future estate duty savings as well.
So what can we say at this stage?
National Treasury and SARS are committed to sorting this mess out. Given that there are some taxpayers swallowing Imodium following the Panama Papers, this is worth a great deal.
This is still a proposal. Although we must wait for the final version to pass through parliament it will do no harm to start getting everything together to complete the VDP application process.
Anyone who dismisses this opportunity and elects to just carry on illegally holding offshore assets must be bonkers. Even if the taxpayer pays 30% to keep the stash offshore that’s a small price to pay. Those detected by SARS after the window period closes could lose the lot and face a range of criminal charges.
There are so many variations to the scheme of holding an offshore stash that it is difficult to give general advice. The best is to consult a tax nerd proficient in the arena of offshore investment.
• Rhodes University Professor Matthew Lester was educated at St Johns College, Wits and Rhodes universities. He is a chartered accountant who has worked at Deloitte, SARS and BDO. A member of the Davis Tax Committee investigating the structure of aspects of the RSA tax system, he is based in Grahamstown.
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