For those taxpayers with undisclosed foreign assets, time is running out. With the introduction of FATCA and a global standard for the automatic exchange of information between countries’ tax authorities, it is unlikely that undisclosed foreign assets will remain as such for long, resulting in serious consequences for the taxpayer.
It is in light of this that the Minister of Finance in his Budget Speech announced that a Special Voluntary Disclosure Programme (VDP), a ‘third amnesty’, would be introduced in order to encourage affected taxpayers to regularise their tax and exchange control affairs.
This Special VDP differs from the first two amnesties or VDP in that in this VDP a taxpayer cannot make use of his unutilised foreign investment allowance in order to offset the levies payable on the unauthorised offshore assets.
The Special VDP has a limited window of application, being from the 1st of October 2016 to the 31st of March 2017.
Provisions of the Special VDP, which we would like to bring to the attention of affected taxpayers, are as follows:
- There will be no normal tax levied on income earned in respect of unauthorised assets prior to 1st March 2010. This means that a taxpayer only needs to go back 5 years insofar as reporting is concerned, and provides certainty to the taxpayer
- During the window period, dependant on whether the taxpayer elects to repatriate the unauthorised assets or their proceeds, or whether they elect to leave the assets offshore, a levy of 5% or 10% respectively, on the market value of the assets will be payable by the taxpayer. The possibility of a lower levy upon repatriating the assets is an attractive option to the taxpayer, who may, in any event thereafter remit the assets back offshore using the R10 million p.a foreign investment allowance;
- After the limited window application period, the taxpayer may voluntarily approach the Financial Surveillance Unit to disclose unauthorised assets, and the Financial Surveillance Unity may, at their discretion, impose levies of between 10 and 40%; and
- In the event that assets are not disclosed through the VDP or voluntarily, the taxpayer will face the full force of the law.
Those taxpayers who are faced with this dilemma should take advantage of this final opportunity to regularise their tax and exchange control affairs upon more favourable terms.