Suzanne Smit, Chartered Tax Adviser from Fidelis Vox recently participated as a panellist in the annual Tax Indaba which is organized by the South African Institute of Taxation.
What was evident from an offshore tax planning perspective, is that tax transparency remains front and centre on SARS’ agenda.
The recently established SARS High Wealth Individual Unit relies on the Income Tax Act’s general anti-avoidance rules, the exchange of information between tax authorities and leaks such as the Panama and Paradise Papers, and the Luxembourg Leaks, published by the International Consortium of Investigative Journalists (“ICIJ”) to identify mismatches between declarations in taxpayers’ tax returns versus their actual earnings, proceeds and assets held. Lifestyle audits are also applied to see if the declared taxable income earned is commensurate to a taxpayer’s lifestyle, especially when it comes to luxury goods and cars.
Furthermore an initiative has recently been confirmed, being piloted by the National Prosecuting Authority, Directorate of Priority Crime Investigation, Department of Justice and SARS which is led by the Financial Intelligence Centre and operating under the auspices of the Anti-Corruption Task Team. They are collaborating on the joint project to curb taxpayers from supporting their opulent lifestyles by means of illicit gains and unexplained wealth.
The current South African asset recovery legislation targeting unexplained wealth is a legislative tool that requires the State to prove that a defendant’s legitimate sources of income are not sufficient to justify assets that the defendant owns, putting the onus on the defendant to prove that the source of the funds for the assets owned is legitimate and that the assets were not acquired from the proceeds of criminal activities. This means that a court can issue an order to confiscate unexplained wealth on the basis that the wealth of a person or entity is disproportionate to the lawful income derived or declared by the person or entity and that the defendant is unable to justify or explain how the wealth was lawfully acquired. This is collectively known as an Unexplained Wealth Order (“UWO”) which will enable law enforcement agencies and SARS to act even in cases where such unlawful activity cannot be proven beyond reasonable doubt. Globally countries such as the United Kingdom, Australia, Ireland, Mauritius and Kenya have the concept of UWOs included in their legislative framework and have successfully recovered such assets. Preparatory activities are underway by the Anti-Corruption Task Team and this initiative is supported by the Organization for Economic Cooperation and Development (“OECD”).
Lastly, the OECD drives the Global Forum on Transparency and Exchange of Information for Tax Purposes (“the forum”) with 165 members, including South Africa as part of the G20. The forum supports its members in curbing offshore tax evasion by monitoring, reviewing and assisting jurisdictions to implement the international standards on tax transparency and exchange of information for tax purposes.
Fidelis Vox applies the following principles when it comes to offshore tax planning:
- Why do you want an offshore trust and / or company?
- Why the specific jurisdiction? If the preferred jurisdiction does not align with the forum’s tax transparency initiative, as well as with FATCA and CRS, we advise against it.
- Following on Albert Einstein’s quote, can you explain the what, how and why to a 6 year old?
We’d be happy to assist you in providing sound and prudent tax advice. No taxpayer or advisor can risk its good standing and reputation in a world where integrity has become key.
Should you require tax advice, please contact Suzanne at suzanne@fidelisvox.co.za or Marteen at marteen@fidelisvox.co.za. We shall be happy to assist.
This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)