This previous Monday, the South African Institute of Taxation held an trade main occasion in collaboration with Tax Consulting SA and Standard Bank, which lifted the veil on Sars’ plans for the taxation of High Wealth Individuals (HWI) in South Africa and the legality of sure offshore constructions.
The occasion featured the honourable Judge Dennis Davis (Chair – Davis Tax Committee) who might be South Africa’s most revered authorized thoughts alongside Prof Keith Engel, CEO of the South African Institute of Taxation, who is named one of many nice servants of South African tax and a key position participant in National Treasury for over a decade in re-shaping South Africa’s tax legal guidelines.
For many attendees the spotlight was the presentation by Sars’ HWI Unit Director, Natasha Singh.
HWI’s and their tax advisors ought to significantly think about the implications of Ms Singh’s presentation which shared Sars HWI Unit priorities and the potential underlying the unit, each when it comes to individuals and use of third-party data.
Sars’s assertion of intent
The preamble of the presentation confirmed {that a} devoted HWI unit was established on 1 April 2021 with the aim to “effectively and efficiently service HWI taxpayers and enhance voluntary compliance”. Ms Singh additional confirmed their focus is on people with gross property value R75 million.
Ms Singh went on to clarify that the HWI unit has a everlasting headcount of 55, with plans to enhance this quantity over the short-medium time period, and which features a multidisciplinary crew specialising in wealth structuring and using particular objective autos, trusts, shares, constructions, devices and so forth.
The opening section concluded with a robust give attention to enforcement and the encouragement of voluntary compliance, with Ms Singh unequivocally stating that Sars’s strategic goal is to “detect HWI taxpayers who do not comply and “make non-compliance hard and costly”.
The lack of subtlety right here evidences that taxpayers face a assured, bolstered income authority, that won’t hesitate to impose life-changing sanctions on wilfully non-compliant taxpayers.
Technology, knowledge and collaboration
There are a variety of South African taxpayers who for a few years believed sure features of their wealth had been past Sars’s purview – together with those that have left the nation however proceed to have South African pursuits.
This consists of using offshore financial institution accounts or intricate company/tax constructions. But simply because one believes these property are out of sight, doesn’t imply they’re out of thoughts for Sars.
Ms Singh reiterated the purpose that “South Africa is an OECD member and subscribes to the voluntary exchange of information, which increase the use of data flows from other jurisdictions”. The use of native and offshore 3rd celebration knowledge isn’t solely energetic and efficient, but additionally a steady on-going course of.
The presentation confirmed that Sars has open entry to all taxpayer monetary data from a variety of monetary and authorized our bodies, together with the Masters Office, CIPC, and Banks. This extends past the borders of South Africa and consists of entry to all offshore data through “offshore third-party data points”. This implies that Sars has entry to offshore data by means of the CRS alternate of data program the place particulars of offshore accounts held by SA residents are exchanged routinely.
Anyone believing that they’re “out of sight, out of mind” could quick discover themselves being approached by Sars. This renders a twin audit with one other jurisdiction doable to guarantee taxpayers compliance.
Sars is aware of what’s in your lunchbox
With these instruments at their disposal, the income authority intends to guarantee any acutely aware choice to be non-compliant is met with the total may of the regulation. Be it by means of aggressive tax planning, wilful non-compliance or negligence, there is no such thing as a hiding from the regulation. Ms Singh aptly closed her presentation by stating that Sars is aware of “all, but what you had for breakfast”.
We are clearly coping with an clever, knowledge pushed and centered income authority that has shaken the dangerous fame of the previous. Sars has issued a transparent assertion of intent and HWI’s are forewarned, and the problems raised could be important and materials with litigation a risk.
HWI taxpayers are due to this fact inspired to search strong help from a supplier with a robust tax and authorized element in structuring their affairs, so they don’t fall foul of the regulation and its intent.
Jashwin Baijoo is authorized supervisor for Africa Tax & Compliance at Tax Consulting SA.