Following recent media reports of South Africans holding undisclosed funds in HSBC accounts, the South African Revenue Service  (“SARS”) has extended an olive branch to all taxpayers allowing them to ‘come clean’ with respect to any undisclosed foreign held investments and bank accounts. 

SARS presently has information relating to South Africans who hold or recently held HSBC bank accounts and they have completed the initial phase of the matching of information. The ability of SARS to trace investments held internationally through international exchange of information procedures is continually being improved and will be considerably enhanced when the Common Reporting Standard reports start flowing. 

SARS recently issued a press release advising taxpayers that if they have any undisclosed investments in foreign jurisdictions, now is the time to advise SARS by using the current voluntary disclosure programme (“VDP”) provided for in the Tax Administration Act.  The window period for submissions of VDP applications for affected taxpayers is very limited as the application has to be submitted on or before 12 August 2015.  The VDP application process will grant understatement penalty relief as well as protection against criminal prosecution. 

Warning â€" should a taxpayer not disclose this information SARS has indicated that, with effect from 13 August 2015, they will commence issuing audit notification letters to all defaulting taxpayers that are known to them.  A taxpayer should consider the risk of severe penalties and interest on any undisclosed investments and, in the worst instance, potential criminal prosecution. 

The disclosure of tax defaults to SARS by way of the VDP application does not grant a taxpayer immunity from prosecution for any exchange control transgressions relating to such investments. Separate disclosure will need to be made to the South African Reserve Bank via an Authorised Dealer of the exchange control transgressions and penalties will likely be payable. Motivation for reduction of penalties should form part of such application. 

Contact your nearest Mazars office should you have any undisclosed foreign investments or bank accounts which require to be regularised by means of a VDP application and/or exchange control application.