Thanks to tax benefits (among other benefits) off-shore company registrations and structures have always been ideal for:
- Import-export companies
- International trading companies
- Asset holding companies
- Family and other trusts
- Other property investments
- Intellectual property
However, new SA tax legislation and international Common Reporting Standard (CRS), mean that previously tax-free income and capital is now subject to South African tax.
Offshore capital and income must now be reported to SARS. The mechanisms for doing so prior to the institution of the new tax legislation in March 2020, are the VDP (Voluntary Disclosure Programme) and the SVDP (Special Voluntary Disclosure Programme).
VDP vs SVDP?
- VDP: Ongoing voluntary offshore investments and company financial reporting mechanism. This allows taxpayer to update their tax affairs retrospectively with the aim of becoming tax compliant without penalties.
- SVDP: Introduced in 2016 and put into effect in January 2017, the SVDP was temporary, but if you have missed the deadline for the benefits it afforded, you may not need to worry. SVDP was specifically aimed at people who have accumulated significant wealth through offshore assets. Like the VDP, it allowed them time to prepare for the tax impact of the new tax regulations.
However, with VDP is for taxpayers liable only for income generated from offshore assets. SVDP is aimed at beneficiaries of offshore assets who are liable for tax on the market value of their offshore assets as well as income generated – and when capital gains tax on offshore assets applies even when they have not derived any income from those assets. The SVDP allowed for these taxpayers to declare without having to pay the capital gains for the grace period offered by the SVDP in 2017.
Special Offshore Structures: Trusts: Family Trust and already taxed Assets:
The simple answer to what structures haven’t required SVDP is: those that don’t need the benefits that SVDP gives them. Disclosure through VDP is fine for the following offshore structures:
- Family Trusts and other Trusts (with assets not legally ‘owned’ by beneficiaries)
- Trusts or offshore investments that derive income from assets that have already been taxed abroad.
- Trusts and assets where that can be shown to have been taxed in South Africa already, or funded by seed money that was taxed in South Africa.
TAT has a wide range of knowledge and experience with the implications of SVDP. Contact us and we can come up with a strategy to protect your wealth.
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