This past Monday, the South African Institute of Taxation held an industry leading event in collaboration with Tax Consulting SA and Standard Bank, which lifted the veil on SARS’ plans for the taxation of High Wealth Individuals (HWI) in South Africa and the legality of certain offshore structures.
Jashwin Baijoo
Head of Strategic Engagement & Compliance
The event featured the honourable Judge Dennis Davis (Chair – Davis Tax Committee) who is probably South Africa’s most respected legal mind alongside Prof Keith Engel, CEO of the South African Institute of Taxation, who is known as one of the great servants of South African tax and a key role player in National Treasury for over a decade in re-shaping South Africa’s tax laws.
For many attendees the highlight was the presentation by SARS’ HWI Unit Director, Ms Natasha Singh.
HWI’s and their tax advisors should seriously consider the implications of Ms Singh’s presentation which shared SARS HWI Unit priorities and the capability underlying the unit, both in terms of people and use of third-party information.
SARS’ Statement of Intent
The preamble of the presentation confirmed that a dedicated HWI unit was established on 01 April 2021 with the purpose to “effectively and efficiently service HWI taxpayers and enhance voluntary compliance”. Ms Singh further confirmed their focus is on individuals with gross assets worth R75 million.
Ms Singh went on to explain that the HWI unit has a permanent headcount of 55, with plans to increase this number over the short-medium term, and which includes a multidisciplinary team specialising in wealth structuring and the use of special purpose vehicles, trusts, shares, structures, instruments etc.
The opening segment concluded with a strong focus on enforcement and the encouragement of voluntary compliance, with Ms Singh unequivocally stating that SARS’ strategic objective is to “detect HWI taxpayers who do not comply and make non-compliance hard and costly”.
The lack of subtlety here evidences that taxpayers face a confident, bolstered revenue authority, that will not hesitate to impose life-changing sanctions on wilfully non-compliant taxpayers.
Technology, data and collaboration
There are a number of South African taxpayers who for many years believed certain aspects of their wealth were beyond SARS’ purview – including those who have left the country but continue to have South African interests.
This includes the use of offshore bank accounts or intricate corporate / tax structures. But just because one believes these assets are out of sight, does not mean they are out of mind for SARS.
Ms Singh reiterated the point that “South Africa is an OECD member and subscribes to the voluntary exchange of information, which increase the use of data flows from other jurisdictions”. The use of local and offshore 3rd party data is not only active and effective, but also a continuous on-going process.
The presentation showed that SARS has open access to all taxpayer financial information from a number of financial and legal bodies, including the Masters Office, CIPC, and Banks. This extends beyond the borders of South Africa and includes access to all offshore information via “Offshore Third-Party Data Points”. This means that SARS has access to offshore information through the CRS exchange of information program where details of offshore accounts held by SA residents are exchanged automatically.
Anyone believing that they are “Out of Sight, Out of Mind” may fast find themselves being approached by SARS. This renders a dual audit with another jurisdiction possible to ensure taxpayers compliance.
SARS knows what is in your lunchbox
With these tools at their disposal, the revenue authority intends to ensure any conscious decision to be non-compliant is met with the full might of the law. Be it through aggressive tax planning, wilful non-compliance or negligence, there is no hiding from the law. Ms Singh aptly closed her presentation by stating that SARS knows “all, but what you had for breakfast”.
We are clearly dealing with an intelligent, data driven and focused revenue authority that has shaken the bad reputation of the past. SARS has issued a clear statement of intent and HWI’s are forewarned, and the issues raised may be significant and material with litigation a possibility.
HWI taxpayers are therefore encouraged to seek robust assistance from a provider with a strong tax and legal component in structuring their affairs, so they do not fall foul of the law and its intent.
Non-Resident Tax Status Reversed? Read This Before Reapplying To SARS