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SARS Disclosure Rule Surpasses FATCA Needs

by Lorys Charalambous,, Cyprus

08 April 2014

The South Africa Revenue Service (SARS) has proposed new disclosure requirements for South African financial institutions, to simplify compliance with the United States's Foreign Account Tax Compliance Act (FATCA) and also expand the nation's access to information relevant to its own domestic tax investigations.

In February last year, the National Treasury and SARS announced the start of negotiations with the United States Department of the Treasury to enter into an inter-governmental agreement (IGA) with respect to the Foreign Account Tax Compliance Act (FATCA). It has now been confirmed that the wording of a draft IGA has been agreed, and will be signed at governmental level as soon as possible.

Once the IGA has taken effect, financial institutions in South Africa will report the required information to SARS, which will then exchange information with the US under the legal framework provided by the double taxation agreement that exists between South Africa and the US.

Under the current FATCA timetable, South African financial institutions will be required to obtain information on US taxpayers in accordance with the IGA from July 1, 2014, and report that information to SARS. The first reporting period is July 1, 2014, to February 28, 2015, and the required information will have to be submitted to SARS by June 2015. Information will thereafter be submitted annually for every tax year ending February.

In addition to South Africa's obligations under its existing network of bilateral double taxation agreements, SARS also noted that there have been other developments in the international arena to use the automatic exchange of information to identify non-compliance by taxpayers using foreign accounts, and to establish a global approach to combating offshore tax evasion. SARS noted that similar information could be valuable for domestic purposes.

SARS has therefore proposed the establishment of a "business requirement specification" (BRS) to cater for automatic periodical reporting of specified information by financial institutions, and its scope has been extended to require affected financial institutions to provide similar information regarding all non-residents, not just US citizens under FATCA. Once the relevant information is available from financial institutions, SARS will be able to automatically share it, if required, with any of its treaty partners, on a reciprocal basis.

Finally, it is emphasized that South Africa will continue to "play a leading role in the global movement towards greater transparency and exchange on information in tax matters to ensure greater trust and fairness in the international tax system. South African taxpayers who have not yet regularized their position with respect to their offshore holdings are reminded that SARS offers a voluntary disclosure program."

TAGS: South Africa | compliance | Foreign Account Tax Compliance Act (FATCA) | tax | business | tax information exchange agreement (TIEA) | double tax agreement (DTA) | tax compliance | FATCA | banking | financial services | offshore | agreements | United States | services | Compliance | Africa | Tax

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