Earlier this year, riding on the coat tails of the #PanamaPapers Expose, SARS proudly announced its Special Voluntary Disclosure Program (VDP) to commence on 1 October 2016. In a typical scare tactic, the media was leveraged to publish various articles including: “You can’t hide your Offshore Assets” containing a rash warning: “If you do not avail yourself of the amnesty, you should emigrate and join your money offshore, or be close to death, because the consequences of being caught are dire and include going to jail!”
The quoted warning emanated from a member of the Davis Tax Committee appointed by the creator of the infamous #RogueUnit.
Don’t be fooled! The VDP is far from an ‘amnesty’! In a nutshell, 50% of all monies deemed to be utilised in establishing offshore assets, will be regarded part of current taxable income in the year disclosed, which besides being a harsh penalty will result in double taxation of post tax money at best. In the case of pre-tax money, disclosure will attract a 200% non-disclosure penalty plus interest. For example, R5m spirals into R15m plus interest.
Coupled with the use of the unconstitutional ‘pay now argue later‘ rule and the ‘reverse onus’, the chances of receiving a fair assessment, settlement and/or trial respectively, are remote to ZERO.
Aside from being counterproductive, the above warning unwittingly conveys a rather sage piece of advice, being to ‘join your money offshore’.
Offshoring and global tax mitigation was and remains a sound financial strategy, specifically by citizens of economies with a high tax rate and soft currency. It is however crucial to ensure that activities are structured legitimately and with commercial purpose.
The Organisation of Economic Co-operation and Development (OCED) is the main body tasked with policing global financial activities. It is largely US-driven and concerned primarily with detection of multibillion Dollar money laundering of US citizens, in the quest for revenue in the aftermath of the Global financial crisis. SA is not a member of the OECD, however, the Enhanced Engagement Program between the BRICS and OECD members as well as the Declaration of Automatic Exchange of Information in Tax Matters in 2014, will heighten the risk of exposure of South African assets but only in the more infamous tax havens, specifically toward the end of 2016.
On the flip side and in the short term there are certain precautionary measures can and should be taken in mitigation of risk. In the longer term, there is a legitimate jurisdiction or two somewhere on the planet that welcomes and provides ample fiscal incentive and protection for your business and/or investments to thrive. Incentives such as grants and funding for research, development and relocation as well as low tax rates, start up rebates and so on and so forth.
As a dual SA-Irish national, the writer is all too au fait with the difference between client’s content with fiscal support and those penalized by the lack thereof. These and other jurisdictions will be elaborated on in articles to follow.
The first part of the phrase, ‘you should emigrate’, is intentionally omitted above as, with savvy fiscal planning, the ‘e’ can be taken out of emigration, allowing for the migration assets in hard currency and continued enjoyment of life in South Africa. Thereby adding to the adage: “Bank in the shade, live in the sun!”.
The aforementioned is not intended to even remotely advocate illegal activities, but as a light at the end of the tunnel depicted by government driven media.
Our passion and expertise lies in legitimizing existing offshore activities as well as the design of new global structures in the interests of protecting and enhancing our clients’ assets.
For further information as to the aforementioned please request a confidential consultation