South Africa CRS Regulations Come Into Effect
The South African Revenue Service (SARS) has issued final regulations that require certain financial institutions (FIs) to report on accounts held or controlled by foreign residents from March 1, 2016.
The OECD’s automatic tax information exchange standard, the Common Reporting Standard (CRS), which the regulations are in response to, obliges countries and jurisdictions to obtain financial information from their FIs and to exchange that information automatically with other jurisdictions on an annual basis.
In South Africa, reporting FIs will, pursuant to legislative amendments to the Tax Administration Act, be bound by statute to obtain the information required on foreign-resident account holders, and provide it to SARS.
For example, in respect to each reportable account, an FI must provide to SARS the name, address, and jurisdiction(s) of residence of each person who is an account holder, the account number, and the account balance or value as at the end of the relevant reporting period, or, if the account was closed during such period, the balance as it stood the day before the account was closed.
In the case of any custodial account, the total gross amount of interest, dividends, or other income generated with respect to the assets held in the account is required, alongside the total gross proceeds from any sale or redemption of financial assets paid or credited to the account during the reporting period. In the case of any depository account, the total gross amount of interest paid or credited to the account during the reporting period should also be provided.
In addition, each reporting FI must establish and apply the due diligence procedures that are described in the regulations, and that are designed to identify reportable accounts and the jurisdiction in which an account holder is a tax resident.
The regulations apply the wider CRS approach. South African FIs must report on all account holders and controlling persons, irrespective of whether South Africa has an international tax agreement with their jurisdiction of residence or whether the jurisdiction is currently a CRS participating jurisdiction. This is intended to ease any future compliance burden on reporting FIs when a jurisdiction is added to the CRS or South Africa concludes a new double tax agreement.
