requires a taxpayer to provide information regarding capital contributions or loans used to fund offshore trusts, as well as information regarding distributions from such trusts to South African resident taxpayers.
The most recent development relating to high net worth individuals has been letters sent by SARS to these taxpayers. The letters are typically based on information provided to SARS under the AEOI from various offshore jurisdictions. These letters typically cover a number of tax years.
Information which SARS may be interested in obtaining could include, for example, confirmation of the taxpayer’s offshore holdings, where the relevant funds are held, details of who facilitated the investments for the taxpayer, the source of funds used to acquire these assets, and income derived from the assets. SARS may also be interested in information regarding compliance with the relevant tax obligations of the taxpayer in relation to such investments or structures.
In this regard, while prescription means that SARS cannot issue additional assessments more than three years after the original or prior assessment, this is not the case if there has been any fraud, misrepresentation or non-disclosure of material facts by the taxpayer. In those circumstances, SARS can go back beyond the three year prescription period.
One of the most popular vehicles used by high net worth individuals is an offshore trust. Trusts have long formed part of South African law and are internationally recognised as legitimate vehicles for holding assets. However, tax authorities around the world have been irked by non-disclosure of offshore trusts. Previously if, for example, an offshore trust was funded by a third party, no South African trustees were appointed, and no distributions were made to South African tax residents, SARS my not have been aware of the existence of such offshore trusts. However, in the new world of tax disclosure outlined above, offshore trusts are very much on the radar of SARS.
Provided that there has been compliance with all the relevant and complex tax rules regarding offshore trusts, no adverse tax consequences should arise. However, if there has been any level of noncompliance, the taxpayer concerned should expect a questionnaire from SARS, followed by an audit process, ultimately resulting in an additional assessment which could include interest and potentially significant penalties.
The days of high net worth taxpayers’ tax compliance status not being fully tested by SARS would appear to be well and truly over.
It can be said with little fear of contradiction that during the reign of David Meyerowitz SC as the editor-in-chief of The Taxpayer, there were times when our editorial meetings – few and far between though they were – were memorable occasions in the cool of evening, after the dust of the day’s disputes had somewhat settled, and we assembled to discuss the subject that fascinated all three of us – tax law.
It cannot be denied that voices were sometimes raised and that ‘Uncle Davey’, as he was affectionately known, did not pull any punches when criticising his junior co-editors (notwithstanding the fact that one of them was a judge of the High Court) or anyone else,
By Trevor Emslie SC
No offence was taken, and since those days one has always been able to assure colleagues that working with Dave Meyerowitz for over twenty years was the finest cure imaginable for a thin skin: what mattered was the quality of the end-product and neither ego nor modesty was allowed to get in the way of that. h e T a x m a n C o m e t h I
including judges of appeal with whose judgments he disagreed – in absentia, and with a flagrant disregard for the principle of audi alteram partem. The debate was robust and the exchanges sharp, but there was no doubting the love of all concerned for the law in general, and for tax law (strange as that may seem to the uninitiated) in particular.
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