The South African Revenue Service (“SARS”) has already identified numerous South Africans listed in the leaked data made publicly available via the ICIJ website and has commenced the audit process by sending queries to certain of these parties. We have had access to audit letters issued by SARS in this regard.
The South African Reserve Bank (“SARB”) is also reportedly in the process of checking the leaked information against its cross-border reporting records and will no doubt follow suit.
The South African National Treasury announced in February 2016 that special tax and exchange control voluntary disclosure programs (“special VDPs”) were scheduled to commence on 1 October 2016 in order to allow South Africans to regularise their offshore affairs, if required.
On the basis that SARS and the SARB have already commenced investigations into South Africans listed in the Panama Papers, this would impact their ability to apply for relief in the terms of the Special VDPs. In particular, the commencement of such investigations by SARS and SARB are most significant, given that:
There is accordingly a significant risk in waiting for the commencement of the special VDPs, if there is a need to regularise tax or exchange control issues. It is understood that certain legislative processes are still to be followed in introducing the special VDP tax legislation, although a process of public participation has already taken place. Revised draft tax legislation may be released in this regard in due course and an explanatory SARB Circular providing information in respect of exchange control regularization in terms of the special VDP was released on 13 July 2016 (“the SARB Circular”).
For those who fear imminent investigations by SARS and/or SARB, there is currently a VDP available under the Tax Administration Act No. 28 of 2011, which might deal with some aspects of cross border tax contraventions, albeit on different terms to the special VDPs. There are also currently processes in place within SARB whereby South Africans may voluntarily apply to regularise any exchange control contraventions.
It is not recommended that listed persons who fear investigation wait for the commencement of the special VDPs. In particular, should SARB and/or SARS commence investigations in respect of a person and notify them of same, this may disqualify the relevant person from any relief.
For those who do not believe they are facing an imminent investigation, the relevant draft tax legislation should be available soon, to enable them to take advice on their position and commence preparations for applications under the Special VDP regime. In addition, regard should be had to the recently released SARB Circular when considering the manner in which to attend to exchange control regularisation in the terms of the Special VDP regime.