The once-off 10 or five percent levy on grey money in foreign countries to be paid by those making use of the amnesty on illegal funds, must be paid out of foreign assets, Alec Bruce-Brand, the head of exchange control at the Reserve Bank, told Personal Finance this week.
The amnesty is effective from May 1 to October 31 2003, with a five percent levy being imposed on money returned to South Africa and a 10 percent levy on grey money left offshore. All the money will be subject to income and capital gains tax from March 1, 2002.
Bruce-Brand says:
- Applicants for the amnesty will have to provide a full declaration of foreign assets; and
- The levy will be on the current value of the assets; not on the original amount illegally transferred offshore.
Bruce-Brand also emphasises that:
- If money has been transferred to any other holding vehicle, such as trusts or companies, it must also be declared with its current value at the time of application;
- The amnesty only applies to money transferred or accumulated offshore before March 1, 2002. Any money transferred offshore or accumulated illegally after that date will be subject to current penalties;
- Any partial declaration will not be acceptable and if it is later found that a partial declaration was made, the amnesty given will be rescinded;
- Separate applications will have to be made to the Reserve Bank (through your commercial bank) for exchange control amnesty and to the South African Revenue Service (SARS) for the tax amnesty; and
- Anyone already being investigated for exchange control or tax contraventions will not be eligible for the amnesty.
Financial services companies say they are already receiving a large number of enquiries from South African residents wanting to take advantage of the amnesty.
The financial services companies are, however, warning clients that once they have information about grey money they will be obliged by law to report this information to the authorities, whether or not an amnesty application is made.
The necessity to report grey money is a requirement under the Financial Information Centre Act, which is mainly aimed at controlling international flows of money being laundered by criminals and terrorists. A by-product, however, is that it allows both SARS and the Reserve Bank to track grey money.
Advice being sought includes legal, tax and investment.
Both SARS and the Reserve Bank are expressing increased confidence in tracking down grey money, particularly with the pressure on tax havens to become less secretive; the exchange of information between tax authorities as a result of double taxation agreements; and the international co-operation on checking capital flows to stop illegal activity.