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Tax havens not safe for much longer

07 August 2015   (0 Comments)
Posted by: Author: Ingé Lamprecht
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Author: Ingé Lamprecht (The Citizen)

South Africans with unauthorised funds abroad better get their affairs in order because tighter regulation in tax havens will soon become a harsh reality, a tax expert has warned.

Tony Davey, director at boutique consulting firm Tony Davey and Associates, says South Africans with offshore funds (foreign inheritances, foreign earnings pre-1998 or "schlep funds” like unspent travel allowances) that weren’t externalised in line with the R10 million offshore investment allowance or R1 million foreign discretionary allowance permitted by the South African Reserve Bank (Sarb) may soon bear the brunt of closer scrutiny.

Tightening belt

Speaking at a recent seminar hosted by The Wealth Corporation, Davey said tax havens like Guernsey, Isle of Man, Switzerland and Lichtenstein have tightened their laws and by the end of 2016 and 2017 these countries will ensure all their clients are compliant with the tax regulations of their home country of residence.

The South African Revenue Service (Sars) does offer a permanent amnesty in terms of its Voluntary Disclosure Program (VDP). Taxpayers who come clean aren’t prosecuted and only have to pay the actual taxes outstanding. They do however have to redo their tax returns for a period of five years to reflect previously undisclosed taxable income. (Taxpayers are required to keep their tax records for five years.)

In its 2015 Budget Review, National Treasury announced that South African residents’ foreign capital allowance would increase from R4 million to R10 million per calendar year from April 1. Taxpayers need clearance to externalise these funds, but also have access to a R1 million foreign discretionary allowance that can be used for any purpose.

In this instance no tax clearance is required

Davey said where individuals err on the exchange control side and disclose their affairs, relief is granted depending on the actual nature of the offence. In practice, the worst-case scenario is usually related to "schlep funds”. However, the Reserve Bank does have a discretion and in practice they find that certain offences won’t attract any penalties if the breach is merely an administrative technicality and the individual puts the case on record, he said.

Sting in the tail

"The worst cases I have come across are the 20% [penalty] scenarios.” Davey said normally individuals can get away with penalties between 0% to 10% if foreign funds are remitted back to South Africa.

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Section 240A of the Tax Administration Act, 2011 (as amended) requires that all tax practitioners register with a recognized controlling body before 1 July 2013. It is a criminal offense to not register with both a recognized controlling body and SARS.


The Act requires that a minimum academic and practical requirments be set to register with a controlling body. Click here for the minimum requirements of SAIT.

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