Hogan Lovells Publications | Tax Alert | November 2016

The current status of the Exchange Control Voluntary Disclosure Programme

The Minister of Finance announced the proposed joint tax and exchange control Special Voluntary Disclosure Programme (the SVDP) during his February 2016 Budget Speech.

On 13 July 2016, the Financial Surveillance Department (FinSurv) issued Exchange Control Circular No 6/2016 containing the details applicable to the regularisation of contraventions of the provisions of the Exchange Control Regulations (the Regulations).

All applications to be submitted for exchange control relief under the SVDP must be made pursuant to the provisions of Regulation 24.

South African residents (such as individuals, sole proprietorships, partnerships, deceased estates, insolvent estates, South African Trusts, close corporations and companies) as well as former South Africa residents (emigrants) will be permitted to disclose their foreign assets held in contravention of the Regulations as at 29 February 2016.

Applications and the relevant supporting documentation must be submitted electronically to the SVDP Unit via the South African Revenue Service (SARS) e-Filing system. Separate electronic application forms for the tax and exchange control administrative relief must be submitted.

Any party, in a matter currently under investigation by FinSurv, may not apply for administrative relief.

It should be noted that special rules will apply to donors of Offshore Discretionary Trusts in that such a donor or the deceased estate of such a donor may elect to deem the foreign assets held by the Offshore Discretionary Trust as being held by that resident.

Applicants will have to pay a levy based on the market value of the unauthorised foreign assets as at 29 February 2016, subject to the following conditions:

• A levy of 5% is payable if such unauthorised foreign assets or the sale proceeds thereof are repatriated to South Africa. The 5% levy must be paid from foreign-sourced funds.
• A levy of 10% is payable if such unauthorised foreign assets are to be retained abroad. The 10% levy must be paid from foreign-sourced funds.
• In exceptional circumstances, the SVDP Unit of FinSurv will permit the payment of a levy of 12% in rand. 

On 13 October 2016, FinSurv issued Exchange Control Circular No 8/2016 advising that SVDP Applications can be submitted as from 1 October 2016 through to 30 June 2017.

This Exchange Control Circular also outlined the procedure to be followed by Authorised Dealers in foreign exchange when making payment of the SVDP levies to FinSurv. 

It should be noted that the SVDP levy must be paid within three months after approval of the exchange control SVDP application, via an Authorised Dealer. All levies introduced from abroad must be converted to rand through the local Authorised Dealer at the ruling spot exchange rate and no commissions/fees may be deducted from the amount introduced.

Individuals should note that the funds repatriated to South Africa must be captured on the FinSurv Reporting System under Category 516, while funds repatriated by entities must be captured under Category 605 08. The SVDP application reference number must, in all instances, be inserted in the relevant space. 

Confirmation of administrative relief will only be furnished once the applicable levy is paid and, if applicable, conditions imposed have been met.

An applicant who is aggrieved by a decision of the SVDP Unit of FinSurv, must deliver a notice of objection within 30 days of the date of delivery of a notice refusing administrative relief or withdrawing or declaring void relief previously granted.  A review panel will consider such appeals and will provide reasons for its decisions.

Prospective applicants should be aware that certain exchange control issues must be dealt with outside of the administrative relief of the Special Voluntary Disclosure Programme. Proper advice should be sought in this regard. 

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