The amnesty for people who have illegal offshore funds starts on Monday, June 1. When the amnesty was first announced, Personal Finance gave readers the opportunity to ask questions about it and undertook to get these answered by the South African Revenue Service (SARS) and the South African Reserve Bank (SARB). However, when the amnesty legislation was delayed, so too were the answers to your questions. The passing of the amnesty legislation this week has cleared the way for us to start publishing answers to your questions. This week, we begin with some commonly asked questions about the basics of the amnesty.
Who may apply?
Any South African resident, close corporation or trust, or any "facilitator" who assisted an applicant in accumulating or transferring foreign assets.
A resident is effectively someone who is "ordinarily resident" in South Africa. A facilitator is a natural person or a "related party" who assisted in the illegal transfer or accumulation of assets outside South Africa. A company controlled by the applicant, or the applicant's family, or a trust or deceased estate of which the applicant is a beneficiary are all related parties.
A facilitator only qualifies for amnesty if the facilitator no longer holds the asset. A facilitator must apply simultaneously with the main applicant for amnesty. Typical examples of a facilitator are:
- A person who physically couriered cash to an offshore bank for an applicant;
- A person who exchanged a foreign asset for a local asset owned by an applicant;
- A person who transferred funds offshore and then donated them to an applicant; or
- The South African executor of the estate of a South African resident with foreign assets who transferred those assets to another South African resident.
Offshore trusts cannot apply for amnesty, but if you donated unauthorised assets to such a trust, you can elect that they be deemed to be your own. If you do so, however, you will have to pay tax on those assets as if they are your own for the tax year ending February 2003.
When must you apply and to whom?
You must apply to the amnesty unit between June 1 and November 30. Application forms are available at www.amnestyunit.gov.za The unit can be contacted by telephone at (012) 315 5420, on fax number
(012) 315 5530, by email at [email protected], or by mail at Private Bag X124, Pretoria, 0001.
What is covered by the amnesty?
The failure to declare amounts in terms of the Income Tax and Estate Duty Acts, the failure to comply with Exchange Control Regulations in accumulating or transferring assets outside South Africa, and assisting a person to accumulate or transfer such assets. The Income Tax Act covers donations tax and capital gains tax (CGT), but failure to pay VAT or PAYE collected from employees, for example, would not be covered.
What about your financial adviser?
Your adviser cannot apply for amnesty unless he or she was a physical facilitator, but you also don't have to name your adviser in your application, nor can you be asked any questions about who advised you. If you do name your adviser, the information about the adviser and what he or she did will not be forwarded to the SARB or SARS by the amnesty unit.
What info will you have to supply?
The application forms were still being finalised late yesterday, so the exact questions are uncertain.
The amnesty legislation states that an application for exchange control amnesty must include a description and the location of the asset, the market value of the asset, and proof of valuation. The law also says an application for tax amnesty must include the receipts and accruals relating to your foreign assets for the tax year ending February 2003. And you must also supply a statement of foreign assets and liabilities as at February 28, 2002. An applicant must confirm that the assets are not derived from "unlawful activities", which, for the purpose of amnesty applications, exclude exchange control, income tax and estate duty offences.
You must also ensure that your tax affairs are up to date and you must submit a tax return for the tax year ending February 2003 by the July 11 due date, unless you have been granted an extension.
If you are also applying for amnesty for failure to declare income you earned in South Africa before you exported it, you must declare the dates on which the income so derived was accumulated or converted to foreign assets.
Do you need to apply if you inherited money or left money behind before you immigrated to South Africa?
Each case will be different, and any offences in such cases will generally be of a minor or technical nature. But you should remember that:
1.
In terms of exchange controls, money inherited or left behind before you immigrated has not been transferred, nor accumulated in contravention of the regulations. However, until recently, these funds should have been declared to the SARB. If you did not do this, you may have technically contravened the exchange control regulations.
2.
In terms of tax laws:
- Interest from foreign banks, building societies, or neighbouring states has been taxable for well over a decade.
- Since 1997, any other interest or "non-business" income (for example, rental) derived from offshore assets has been taxable.
- Foreign dividends have been taxable since 2000.
- All foreign income of South African residents (with some specific exceptions) has been taxable for the years of assessment starting on or after January 1, 2001.
- Since October 2001, any disposal will have been subject to CGT.
You need to apply for the tax amnesty if you have failed to declare any one of these forms of taxable income. The onus will be on you to prove that you inherited money. If you are in doubt, it would be best to apply for amnesty, because if you have assets that you legitimately accumulated or held outside South Africa, you won't pay any levy.
How much is the amnesty levy?
You will only pay a levy on amounts you have offshore that are unauthorised. So, for example, if you have less than the R750 000 offshore allowance (and have not used the allowance), you will not pay anything. If your unauthorised funds are more than R750 000, you will pay either five percent or 10 percent of the amount over R750 000. You will pay five percent if you bring the money back to South African and 10 percent if you leave it offshore. The five or 10 percent will be calculated on the value of the assets in foreign currency as at February 28, 2003, converted to rands using the exchange rate on the date the levy is paid. If you need amnesty for taxes not paid in South Africa on money you exported, you will pay a levy of two percent on the amount you exported.
When and how must the levy be paid?
The exchange control amnesty levy must be paid from your offshore assets - either from the money you repatriate or that which you leave offshore. If you no longer have any foreign assets, repatriated funds may be used. In the case of repatriated assets, you must pay the levy on the day you repatriate the assets, which must be within three months of receiving approval of your application. In the case of assets you leave offshore, you must pay the levy within three months of receiving approval of your amnesty application.
There is no exception for illiquid assets - for example, property or an investment which is tied up for a fixed term. The only concession is that the three-month period can be extended by a further three months if you can prove that the asset cannot reasonably be converted to rands in the first three months.
Can your amnesty application be denied?
In terms of the law, you must be granted amnesty if you comply with all the requirements - in other words, you provide all the necessary information. The only exceptions are: if you do not submit your amnesty application within the deadline; if you are already being investigated by, for example, SARS for tax evasion relating to an offshore asset; or if you fail to confirm that the assets in question are not the proceeds of unlawful activities. Approval falls away if you fail to pay the levy, fail to submit your 2003 tax return or if it later emerges that the foreign asset is derived from unlawful activities.
What will happen to information you give the amnesty unit?
If your application is successful, the information will, for the purposes of updating records, be passed on to the SARB and SARS, without reflecting any names other than yours, as the applicant, and any joint applicant.
Neither the SARB nor SARS may ask you for details of any person who advised or assisted you with the accumulation or transfer of assets.
Where approval is denied, information submitted will be retained by the amnesty unit and not disclosed to SARB or SARS. Unsuccessful applications will be retained by the National Treasury, under the same conditions of secrecy as if the amnesty unit still held them, for a period of five years after the amnesty unit closes, presumably for the purposes of any appeals or court proceedings.
Based on questions and answers prepared by Jim Dawson, the manager of legal affairs, compliance and training at Old Mutual International. Confirmed by SARS.