The Sanlam/Personal Finance Grey Money Amnesty seminars were held around South Africa over the past two weeks. In this, the first in a series of articles on the seminars, we report on the joint presentation by Alick Bruce-Brand and Chris Grové, both of whom are senior officials at the South African Reserve Bank.
You can apply for the exchange control amnesty, but possi bly not the related tax amnesty, if you left South Africa without officially emigrating, Reserve Bank officials say.
Alick Bruce-Brand, the head of the exchange control department of the South African Reserve Bank (SARB), and Chris Grové, the deputy head of SARB's exchange control department, made a joint-presentation to the Sanlam/Personal Finance Grey Money Amnesty seminars.
The amnesty only applies to residents of South Africa who had unauthorised foreign assets abroad on February 28 this year.
The exchange control legislation and the income tax legislation have different definitions of who is a "resident". In terms of the exchange control legislation, you are considered to be a resident even if you no longer live in South Africa but have not placed your emigration on record with the SARB's exchange control department or an authorised exchange control dealer, Grové says.
In terms of the Income Tax Act, you are only a resident if you have been present in the country for a certain number of days of the tax year. If you are "ordinarily resident" in South Africa, you are likely to be a resident, while if you are "ordinarily resident" in another country, for tax purposes you are likely to be a non-resident.
If you are a resident, you can apply for the amnesty as a natural person or through a close corporation or trust, Grové says. A deceased estate can also apply for amnesty. Companies have been excluded from the amnesty, he says, because the policymakers argued that companies operated under a different exchange control regime, and in the past always had more opportunities to export money legally than individuals.
In order to qualify for the amnesty, you must have had unauthorised assets abroad on February 28, 2003. However, if you had foreign currency or traveller's cheques in your possession in South Africa (rather than abroad on February 28, 2003), this will also be regarded as an unauthorised asset held in foreign currency in terms of the amnesty, Grové says.
The amnesty does not extend to individuals who gave financial advice regarding unauthorised offshore assets. But related parties (such as your company or a friend) that assisted you in accumulating foreign assets or transferring the funds from South Africa for your benefit, can apply jointly with you.
A company, the shares of which are wholly owned by an applicant, may apply for the amnesty as a facilitator, but not in its own right.
In order to apply for the amnesty, you need to file an amnesty application by way of a sworn affidavit or solemn declaration before November 30 this year, Grové says. In the application form you need to:
- Declare the market value of your asset on February 28, 2003 in the foreign currency of the country in which the asset is located; and
- Give a description, identifying the characteristics and location.
As proof of the value of your asset, you need to supply one or more of the following:
- A valuation certificate from a valuator in the country where your asset is based;
- In the case of a financial instrument, the original or a certified copy of the statement of account indicating the balance or market value as at February 28, 2003;
- A valuation by a sphere of government of the country in which your asset is based; and/or
- Any other proof of value of the asset that may be acceptable to the amnesty unit.
A facilitator will also need to confirm that he or she has no reason to believe that any of the foreign assets of the applicant were derived from the proceeds of an unlawful activity.
Amnesty denied
Grové says you can be denied exchange control amnesty if:
- Your application is not delivered to the amnesty unit in time;
- You have, before you submit your amnesty application, given notice by either the exchange control department of the SARB or SARS that you are subject to audit, investigation or other enforcement action; or
- You fail to confirm that none of your foreign assets is derived from the proceeds of unlawful activity.
If you are given notice that you are under investigation, Grové says, you can approach the exchange control department of the SARB or SARS and discuss the matter with them.
They have the right to withdraw the notification.
Grové says a "to the extent" principle will apply, which means that to the extent that you have declared your foreign assets, you will be granted amnesty.
For example, he says, if you declared R5 000 of unauthorised assets offshore, and it is later discovered that you in fact have R10 000 offshore, the amnesty for the R5 000 which you were granted cannot be taken away. But you will be subject to full investigation and prosecution for the undeclared R5 000.
If your application is approved
If your amnesty application is successful, you may either retain your assets abroad or repatriate them to South Africa.
If you keep your assets abroad (or in the case of cash and traveller's cheques, if you keep them in a foreign currency), you will be liable for a levy of 10 percent of the value of your assets as at February 28, 2003, less any unused portion of the R750 000 foreign capital allowance. In other words, if you have not used your offshore allowance at all and you have less than R750 000 offshore, you will not pay any levy. If, for example, you have legally exported R400 000, you still have R350 000 of your allowance left. You may reduce your unauthorised assets by this amount before calculating the levy.
If you repatriate your assets, you will pay a levy of five percent of the value of the assets as at February 28, 2003, less any unused portion of the offshore allowance.
Whatever amount you repatriate (including the 10 percent levy) must be converted to rands through an authorised foreign exchange dealer at the ruling spot rate of exchange on the day you repatriate it, Grové says.
For example, if you have used your R750 000 allowance and have unauthorised assets to the value of US$10 000 and you want to keep them abroad, you will have to repatriate US$1 000 (the 10 percent levy), and the rand proceeds on the day you repatriate the US$1 000 must be paid as the levy. This applies regardless of what has happened to the exchange rate in the interim - for example, on February 28, 2003 the rand value of the US$1 000 levy may only have been R8 000 (at an exchange rate of R8:$1), but if the rand depreciates, the rand value of your US$1 000 levy may then be higher - for example, R10 000 (at an exchange rate of R10:$1). If the rand strengthens, however, the rand value may be less.
Grové says the US$1 000 must be paid regardless of what fees and charges you incur in bringing the money back into the country. You will have to fund these charges from other sources.
He also says that the levy will apply regardless of what has happened to your investment in the interim and how this affects what you repatriate. For example, if on February 28, 2003 you had US$10 000, and you decided to repatriate it, but by the time your application is approved and you have to repatriate it your investment value has declined to US$7 000, you will have to pay the five percent levy on the US$7 000 introduced and a 10 percent levy on the US$3 000 you have since lost and cannot repatriate.
You cannot, Grové says, under any circumstances pay the levy from domestic sources, and you must pay the levy within three months of your amnesty application being approved. If you can show good reason why you cannot pay within the three months, you can apply for an extension of a further three months.
Bruce-Brand says the illiquid assets will have to be liquidated or you will have to borrow against them to repatriate the levy to South Africa.
After your application has been processed
If you have been granted amnesty and once you have paid your levy, you will be deemed not to have contravened the exchange control regulations in respect of the market value of the foreign assets you have declared and any other foreign assets you had already disposed of by February 28, 2003, Grové says.
A facilitator is likewise also deemed not to have contravened the exchange control regulations, he says.
Information from approved applications will be sent to SARB's exchange control department and to SARS so they can update their records.
Neither the amnesty unit, nor the exchange control department nor SARS may ask you for details about who advised or assisted you, Grové says. Unsuccessful applications will be filed with the National Treasury for five years in case you appeal against the amnesty unit's decision.
Details of your unsuccessful application will not be passed on to the SARB or SARS, and you can only be prosecuted if SARB or SARS officials find you out independently without reference to your amensty application, Grové says.
The Minister of Finance will be informed and will report to Parliament on how many applications have been approved, how many have been declined, the amounts of relief granted and the levies paid. He will not, however, be told the identity of any applicant or facilitator, Grové says.
Both Bruce-Brand and Grové stressed that it is highly advisable to apply for amnesty because this is a unique opportunity to put your affairs in order.