When considering SARS’ well-known “Strategic Intents” one can easily see the implementation of the “Beneficial Ownership Register” by the Companies and Intellectual Property Commission (CIPC) as a precursor for SARS’ international crackdown on non-compliance. 

You may ask what the end goal is, and it remains the total eradication of non-compliance, by making it both hard and costly for taxpayers who think they can play by their own rules.

SARS made this message loud and clear in June 2023, when it aligned with the CIPC’s new “Beneficial Ownership Registers” by amending the company annual tax return requirements. At the time, this was merely a procedural and policy implementation, with the deadline for declaration of Beneficial Ownership (BO) being October 2023.

Fast-forward a month, and we see BO amendments now proposed in the “Draft Tax Administration Laws Amendment Bill, 2023”, which the National Treasury released for public comment on 31 July 2023 – but is it really up for debate? 

The “Proposed” Changes

Whilst the draft tax law amendment bills are out for public comment, the odds of any adverse commentary dissuading government from the promulgation of BO statutory requirements is slim to none. The reality is that if the new proposed requirements were really up for debate, neither CIPC, SARS, nor the Master of the High Court, would already have live registers in place.

It is evident that there is no getting around this for the astute investor, businessman, or average taxpayer, who happens to hold more than a 5% interest in almost any juristic entity or can exercise effective control over it. Here is what you need to know about the coming compliance crackdown:

1. The General Law Amendment Act has amended the Companies Act, the NPO Act, and the Trust Property Control Act, to include a requirement for BO disclosures, and includes additional grounds for director disqualification;
2. A proposal to include the definition of “beneficial owner” in the Tax Administration Act. To ensure that this is all-encompassing, the definition is to be assigned the meanings in regard to a company, trust, and partnership, in alignment with the National Strategy on AML/CTF/CFP to develop an integrated and harmonised BO framework; and
3. Most importantly – the inter-organisational sharing of information has extended beyond its prior scope, which included the Reserve Bank, FSCA, FIC and the National Credit Regulator. This list will soon also include the CIPC, the Directorate of Nonprofit Organisations, and the Master of the High Court!

What This Means

The fast-changing compliance landscape in South Africa is no coincidence and aligns itself with not only SARS’ Strategic Intent but also with SARS’ enhanced Approval International Transfer – good luck transferring dividends and distributions offshore where you have not transparently disclosed your BO interests!

Taking this beyond just SARS and what was initially thought as randomised and only anticipated by the astute tax professional with their ear to the ground, these changes can now clearly be seen as step 1 in opening up the information-sharing floodgates. 

The proposed amendments will allow for the disclosure of taxpayer information to various government agencies. The objective, it seems, is clear: Cross-verification of BO details, under a single BO framework, in alignment with the National Strategy.

In furtherance of this objective, the underlying rationale is to achieve consistency with the General Laws Amendment Act and address the technical deficiencies identified under the Mutual Evaluation Report of South Africa adopted by the Financial Action Task Force.

Do Not Let the Facilitation of International Cooperation Be Your Extermination

National Treasury has highlighted how crucial the proposed BO regulations are for ensuring transparency and accountability in all financial transactions. This will allow an inter-organisational determination of tax liability, whilst preventing tax evasion, as the benefitting individual will be more easily identifiable. 

The international cooperation facilitated through BO, together with furthering the agenda of tax-related information sharing between jurisdictions, serves to bring the compliance net that SARS has already cast to a close.

Be it with SARS, FIC, the Master, or the Reserve Bank, the party bearing the onus of compliance is ultimately you, the taxpayer. Where uncertain of your, or your company’s compliance status, it is prudent to approach an astute corporate and tax attorney to run a diagnostic on both your CIPC and SARS affairs, before the organisations do it themselves!

Not only does this ensure legal professional privilege on all disclosures, but also being specialists in their own right, guarantees the execution of the correct remedial measures, whilst upholding the first mover advantage you gain from being proactive.

Written by Jashwin Baijoo, Head of Strategic Engagement and Compliance at Tax Consulting SA