The 2016/2017 Budget Speech by the Minister of Finance, Pravin Gordhan saw the announcement of a Special Voluntary Disclosure Programme (“SVDP”), which is aimed at encouraging South African residents with undisclosed offshore assets and income to regularise their affairs through the SVDP.

The Financial Surveillance Department of the South African Reserve Bank (“FinSurv”) will be offering South African residents an opportunity to regularise their exchange control affairs by applying for relief under the SVDP in respect of contraventions of the Exchange Control Regulations, and which contraventions include, inter alia, ownership of unauthorised foreign assets. This will allow South African Residents to regularise undisclosed or unauthorised foreign assets held as at 29 February 2016.

Applications for relief under this SVDP will only be permitted for a limited window period commencing on 1 October 2016, and closing on 30 June 2017.

As a requirement for the SVDP, applications must be made voluntarily by South African residents (including individuals, partnerships, sole proprietors, deceased estates, insolvent estates, SA trusts, close corporations and companies). The applicants will be required to furnish to the FinSurv (i) the market value of the unauthorised foreign assets in the foreign currency of the country where each asset is situated as at 29 February 2016, (ii)  a description of the identifying characteristics and location of each asset, (iii) a valuation certificate by a valuator of the country where the unauthorised foreign asset is located, or an original or certified statements of account indicating the balance or market value or any other proof of ownership acceptable to the FinSurv, and (iv) a sworn affidavit declaring the contravention.

The SVDP does not apply to any South African resident who is subject to a pending and/or current investigation by the FinSurv into their contraventions of the Exchange Control Regulations.

RELIEF GRANTED UNDER THE SVDP

South African residents who successfully apply for relief under the SVDP will be required to pay a levy based on the market value of each asset as at 29 February 2016 as follows:

  1. A levy of 5% is payable on the value of the unauthorised foreign assets or the sale proceeds thereof, if such assets are repatriated to South Africa. Such levy must be paid from foreign-sourced funds; or
  2. A levy of 10% will be payable on the value of unauthorised foreign assets if such assets are retained abroad. The 10% levy must be paid from foreign sourced funds, failing which, the levy will be increased to 12%.

 

It must be noted that applicants will not be allowed to deduct any exchange control allowance or any remaining portion thereof from any leviable amount and the applicable levy may not be reduced by any fees or commissions, for example, fees incurred in order to sell the relevant asset and to repatriate assets to South Africa.

In some cases, a South African resident may qualify for administrative relief outside of the SVDP. For example, the retention of foreign assets abroad by virtue of foreign inheritances. These applications should be made to the FinSurv via an authorised dealer, and not under the SVDP. These disclosures will, in most instances, not attract a levy.

South African residents who do not utilise the SVDP, and who after 30 June 2017 make a full disclosure to the FinSurv, will be required, at the discretion of FinSurv, to pay a settlement amount ranging from 10% to 40% on the current market value of the unauthorised foreign assets.

South African residents who are in contravention of the Exchange Control Regulations and who fail to apply for relief or assistance and who are subsequently investigated by the FinSurv, will face the full force of the law.

REPORTING OBLIGATIONS: ADVISORS

Accountable institutions assisting clients in making use of the SVDP must comply with the requirements of the Financial Intelligence Centre Act (“FICA”). These obligations include establishing and verifying the client’s identity and retention of records. Any South African resident who approaches an accountable institution for assistance on the SVDP and who submits a SVDP application will not fall to be reported to the FIC. 

CONCLUSION

The FinSurv have indicated that this will be the last opportunity for South African residents to regularise their contraventions of the Exchange Control Regulations. 

With the new global standard for the automatic exchange of financial account information between tax authorities (known as the CRS), to which South Africa is a founding signatory, the FinSurv and SARS will be able to obtain detailed information from financial institutions and exchange that information with other jurisdictions from September 2017 onwards.

As such, we strongly recommend that any South African residents who may have breached the Exchange Control regulations make use of the SVDP. 

Liz Pinnock  Director | Head Group Legal, Johannesburg

Washington Tawanda Zindoga  Legal Assistant, Johannesburg