You may ask yourself how SARS intends on being the forewarned “catalyst”, well quite simply, by continuing to “Follow the Money”. By their very nature, and in the name itself, High Wealth Individuals and Multi-National Enterprises are the big ticket taxpayers, whose non-compliance translates directly to millions, if not billions, in revenue collections for SARS.
Compliance Revenue Programme Clampdown
The success of SARS’ clamp-down on non-compliance cannot be disputed, especially in extreme cases with high-profile taxpayers – setting an example to the nation. With the current focus on High Wealth Individuals and Multi-National Enterprises, together with their “trusted” advisors, being taxpayers in their own right, the goal for 2024/25 remains the same – to “maximise revenue collections”:
Excerpt from pg. 29 of SARS’ Revenue Announcement 2024 Media Pack
When it comes to SARS’ war on non-compliance, no punches have been pulled, even when punching in the heavyweight division. Being a strategic mover, Kieswetter’s strategic initiatives such as the creation of the High-Wealth Individual Unit and insertion into the law of Advanced Pricing Agreements, have served to bolster SARS’ reach and capacity, being the bane of existence for non-compliant affluent or MNE taxpayers.
Multi-Nationals, Benchmark Your Billions
MNEs are all too familiar with international transactions, but it is astonishing how many fail to adhere to international tax law, specifically pertaining to base erosion and profit shifting, aka Transfer Pricing.
Although the “arm’s length principle”, and Transfer Pricing specific Articles, are well-established international principles of the Organisation for Economic Co-operation and Development, many MNEs find themselves facing Transfer Pricing Audits on a regular basis. Practically, this stems predominantly from failing to establish the correct tax and legal foundation to support the commerciality and profitability of “affected transactions” between companies under common control.
A common misconception was that SARS lacked the technical Transfer Pricing expertise to conduct these Audits, yet you ask yourself how R36,6 billion was collected from 31 Transfer Pricing Audits, 5 International Audits and 8 Integrated Audits. The answer is quite simple, SARS has strengthened their tax treatment on all international transactions, through various AI data driven processes and the outsourcing of specific functions – a competent revenue authority, like nothing South Africans have seen before.
In practice, and to ensure group compliance, it is essential for MNEs to enlist the appropriate tax advisory, and legal muscle, ensuring all Transfer Pricing documents, including Local and Master Files, are legally sound and will meet the muster of any revenue authority.
High Wealth = High on SARS’ List
High Wealth Individuals are known for elaborate offshore structures, and multi-layered investments, all created in an effort to optimize their taxes whilst preserving their wealth. Be it based on sometimes aggressive tax advice from a “trusted” advisor, or conservative but bespoke tax planning, one key concern has always remained; how do you get the money out.
Statistically, the confirmed revenue contribution from this segment of society is recorded at R12,5 billion in the last year. If you think SARS are willing to let than number diminish, you would be sorely mistaken – the introduction of the High Wealth Individual Unit, and implementation of the Approval for International Transfer process evidence SARS’ efforts to sink their claws in even deeper, in efforts to be South Africa’s Robin Hood.
Even though SARS have noted they see a decline in High-Wealth Emigration applications, this is not to say that South Africans are not looking at alternate ways to optimize their tax affairs, including offshore investments. Kieswetter has confirmed that SARS saw AIT applications to the tune of R13,6 billion for the last reporting period, and only approved R7 billion.
Any hold up is often caused by applicants being ill-advised, or ill-gotten gains; SARS’ sentiment remains “applicants are encouraged to ensure that their affairs are in order, before making the application because your application will trigger a risk review”.
Don’t Be a Revenue Report Headline
Where you find yourself, your business, or your Big-Ticket clients on SARS’ radar, it is imperative to have in place the correct international tax planning and legal representation, ensuring best in market guidance is received on all financial compliance. We have seen in the market a number of ill-advised taxpayers seeking the correct counsel only after the fact and paying the price for it.
As a rule of thumb, any and all correspondence received from SARS should be legally addressed, as often legal professional privilege is a must in instances of non-compliance. This will not only serve in safeguarding against SARS implementing collection measures or potentially criminal charges, but also being specialists in their own right, taxpayers and practitioners will be correctly advised on the most appropriate solution to ensure full tax compliance.
