The implications of FATCA in South Africa
First published in Bloomberg BNA, 7 July 2014
Until now FATCA has largely impacted US taxpayers with specified foreign financial assets. However the recent Inter-Governmental Agreement (IGA) entered into between the US and South Africa entitles South African Revenue Services (SARS) to receive reciprocal information from the US in relation to South Africans who hold US investments.
The IGA seeks to ensure that “Reporting South African Financial Institutions” (eg a depository institution or an investment entity in South Africa) will report information about US taxpayers to SARS. SARS will in turn relay that information, by means of automatic exchange of information (AEOI), to the IRS under the double taxation agreement already in force between the US and South Africa. The IRS will in turn provide similar information about South African account holders in the US to SARS.
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In terms of SARS Media Release dated 9 June 2014 the IGA has been implemented to promote transparency between the US and South Africa on tax matters and furthermore underscores growing international cooperation in the endeavour to end tax evasion worldwide. The SARS Media Release states that South Africa is committed to automatic exchange of information for tax purposes and to thereby make the world a more transparent place from a tax perspective.