Johannesburg - First National Bank is warning that South Africans with illicit offshore portfolios are not likely to get another amnesty.
The bank, one of SA’s big four, notes it’s acceptable to have an offshore portfolio, although South Africans can only invest up to R10 million outside South Africa on an annual basis, on the proviso that tax clearance has been given by the South African Revenue Service.
Read: You can't hide your offshore assets
Until now, a lack of co-operation between different countries has created some grey areas, but increased global vigilance and the launch of the Organisation for Economic Co-operation and Development’s (OECD’s) new Automatic Exchange of Information portal will increase the necessity for compliance, says Tony Barrett, FNB Financial Advisory Wealth Manager.
While South Africa has joined a raft of developed world economies in signing up for the portal, it is important to note that the declaration of offshore interests has long been on the country’s radar. “The first offshore exchange control and income tax amnesty appeared in 2003 and a second similar amnesty followed in 2010,” explains Barrett.
In his 2016 Budget Speech, Finance Minister Pravin Gordhan announced another exchange control and tax amnesty for errant South African taxpayers. Under the OECD programme, data will be collected in 2016 and the first exchange of information between co-operating countries will take place in 2017.
As a result, with this automatic exchange of information on the horizon, the current amnesty is likely to be the last one offered, says Barrett.
“There will be no place to hide for offenders,” says Barrett. “So there will be no need to offer further amnesties as the information will be readily available. Version three of the South African amnesty could, therefore, literally be the last chance saloon for offenders.”
National Treasury has outlined the terms of the third amnesty, which, from an exchange control perspective, are not dissimilar to the previous two amnesties.
Where the owner wants the funds to remain offshore, there is a 10-percent penalty on funds that are in breach of exchange control regulations. If the funds are remitted back to South Africa, only a 5-percent penalty is payable. These penalties must be paid from the offshore funds and where there is a lack of available offshore cash, such as for property holdings, the penalty can be paid from rand-based sources, but an extra 2 percent additional penalty is added.
“There are, of course, also tax implications, with National Treasury advising that 50 percent of taxes owing would be due and payable for the last five tax years. This is a point on which some clients may need professional tax opinion as there has been no detail given as to how this 50 percent would be computed.
“Interest would be charged on outstanding taxes, but no penalties would be levied. It is presumed that applicants would need to re-open previous assessments on their SARS E-filing profile and resubmit tax returns for these periods,” he notes.
With the amnesty application period running for six months, from October 1, Barrett believes South Africans have a generous opportunity to regularise their affairs.
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