The Special Voluntary Disclosure Programme (SVDP) running until 31 August offers South African residents the opportunity to regularise their tax defaults and exchange control defaults.
There have been a number of similar opportunities to regularise tax and exchange control affairs in the past. We have seen two previous special amnesty opportunities in 2003 and 2010 and the permanent VDP which came into force on 1 October 2012 and does not have a termination date. The current SVDP is the latest special opportunity, and the last that we expect to see in the foreseeable future.
The Finance Minister clearly stated in his budget speech in February 2016 that the SVDP would be the final chance for South African residents to regularise their offshore assets. Internationally, there is pressure on jurisdictions around the world to deliver on their political commitment to fight tax evasion. The existence of the Foreign Account Tax Compliance Act (FATCA), the Common Reporting Standard (CRS) and other inter-governmental agreements mean that there will be free-flow of financial information between jurisdictions shortly. Under CRS alone, 101 jurisdictions have agreed to start automatically exchanging financial account information, with over 1300 relationships now in place. Keeping undisclosed accounts is an increasingly risky gamble.
The social media and information age is also making it increasingly more difficult to hide accounts from the South African Revenue Service or the South African Reserve Bank. The recent exposés of the Panama Papers confirm this.
The SVDP is relatively expensive and could see a loss of approximately 20-35% of the total accumulated offshore assets if the applicant has to regularise both tax and exchange control defaults. While the current SVDP deal is not attractive to many applicants, it is unlikely that they will get a more favourable opportunity in future.
Each subsequent amnesty/VDP since 2003 has been more expensive and onerous compared to the previous opportunity. The early applicants received better deals compared to applicants under later opportunities. The longer a South African resident applicant waits, the higher the risk of being caught and the lower the relief granted by the amnesty/VDP.
The alternative to taking advantage of the SVDP is running the risk of being caught.
Should offenders be caught, the penalties levied would be far more onerous and there is also the possibility of criminal prosecution. The disclosure programmes, despite being expensive, offer South African residents the opportunity to regularise their affairs on beneficial and manageable terms when compared to regularisations outside of the programme.
An important consideration is that the SVDP provides South African residents with an opportunity to ensure that they will be able to continue to access quality service providers and financial institutions, as such organisations may be not be capable of or unwilling to assist clients with assets that have not been regularised in the future.
We advise taxpayers to take advantage of the opportunity afforded by the SVDP and to seek expert help. The SVDP is a complex process and it is important that the submission is accurate and complete to achieve the benefits.