SARS REPORTABLE ARRANGEMENTS AMENDED

On 16 March 2015 a public notice was issued by the Commissioner for SARS which listed a number of new transactions which would be regarded as reportable arrangements from the said date.
 
What is a Reportable Arrangement?
A reportable arrangement is in effect any transaction which has the objective of obtaining a tax benefit in an undue manner.
 
In simple terms the arrangement must be reported to SARS by the ‘promotor’ (person who promotes the arrangement) or a ‘participant’ (person who derives a tax benefit from the arrangement) if an arrangement has certain characteristics as listed in Section 35(1) of the Tax Administration Act (TAA) or listed by SARS in a public notice (in terms of Section 35(2) of the Act). 
 
The following arrangements are now also reportable under the public notice which was issued on 16 March 2015:
 

• Hybrid Equity and Hybrid Debt Instruments:

  • Certain arrangements that qualify as 'hybrid equity shares' in terms of Section 8E of the Income Tax Act (ITA) and certain 'hybrid debt instruments' in terms of Section 8F of the ITA (other than listed shares) if the prescribed period in that section had been ten years. Any instrument that is convertible into shares or debt within a prescribed period is usually identified as a hybrid instrument.

• Share Buy-Back Coupled with New Share Issues:

  • An arrangement in terms of which a company buys back its shares for a price of more than R10 million and the company issued or is required to issue shares within 12 months of entering into the arrangement or the date of the buy-back.

• Contributions to and Beneficial Interest in Foreign Trusts:

  • An arrangement in which a local tax resident who is a beneficiary of a non-resident trust makes a contribution to this trust and the value of the contribution or the interest in the beneficiary in the trust exceeds R10 million (investments in certain offshore collective investment schemes are excluded).

• Assessed Loss Companies:

  • An arrangement in which a person acquires a direct or indirect controlling interest in a company that has, or is likely to have, an assessed loss exceeding R50 million. A controlling interest in the ‘assessed loss’ company can be acquired through acquisition of shares, voting rights or a combination of both.

• Arrangements with Foreign Insurers:

  • An arrangement in terms of which a local tax resident pays more than R5 million to an offshore insurer and the return of the insurance policy is determined mainly with reference to the value of particular assets held by the insurer.

 
An important point to note is that any arrangements where the aggregate tax benefit which may be derived by all participants to the arrangement is less than R5 million is excluded from the operations of Section 35(1) of the TAA.
 
Non-Disclosure of the Reportable Arrangement
Non-disclosure of the reportable arrangement to SARS will result in penalties in terms of Section 212 of the TAA.
 
In terms of this section, a person who fails to disclose the information in respect of a reportable arrangement is liable to penalties for each month that the failure continues (limited to 12 months). If a ‘promotor’ fails to report the arrangement, the penalties will be R100 000 for each month that goes by, and R50 000 for each month in the case of failure by the ‘participant’ to the arrangement. The amount of the penalty may be doubled (if the anticipated tax benefit for the ‘participant’ exceeds R5 million) or even tripled (if the anticipated tax benefit exceeds R10 million).  A portion of the penalty may be remitted in the case of first incidence of non-compliance or non-compliance that endures for less than five business days.
 
Section 38 of the TAA sets out the information that a ‘promotor’ or ‘participant’ must submit to SARS. The information must be submitted within 45 business days of the date the arrangement becomes reportable.
 
http://www.dbriefsap.com/bytes/SouthAfrica_ReportableTransactions.pdf