MUTUAL ASSISTANCE AND CO-OPERATION BETWEEN THE SOUTH AFRICAN REVENUE SERVICE AND FOREIGN TAX AUTHORITIES

By Betsie Strydom Monday, August 11, 2014
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Recent international developments have made it increasingly difficult for taxpayers to hide their assets or to avoid tax and South Africa has joined the list of countries that fully comply with international standards on the transparency and exchange of taxpayers’ information. South Africa is a member of the OECD’s Global Forum on Transparency and Exchange of Information for Tax Purposes (the Global Forum) (chaired by the chief officer of legal and policy at the South African Revenue Service (SARS), Kosie Louw).

The Global Forum recently conducted a peer review of 50 jurisdictions, and South Africa is one of only 18 fully compliant countries. Media statements from SARS emphasise the benefits of automatic information exchange and increased co-operation between revenue authorities for clamping down on tax evasion, and express commitment to increased transparency and co-operation for tax purposes.

South Africa is also currently taking steps to implement the Foreign Account Tax Compliance Act (FATCA) enacted by the United States of America (the USA) in 2010. On 9 June 2014, South Africa and the USA signed an intergovernmental agreement entitled the “Agreement to Improve International Tax Compliance and to Implement the Foreign Account Tax Compliance Act” (the IGA). The IGA is a reciprocal agreement, which ensures that financial institutions in South Africa will report information about US account holders to SARS). SARS will transmit that information to the USA’s Internal Revenue Service (IRS) by means of an automatic exchange of information under the double taxation agreement in force between the United States and South Africa. The IRS will similarly provide information about South African account holders in the United States to SARS.

Bilateral and Multilateral Taxation Treaties 

South Africa currently has a wide network of bilateral double taxation agreements in place, 1 most contain provisions allowing the exchange of information between South Africa and the other contracting states. Certain of these agreements, such those with the United Kingdom and Australia, also contain specific articles providing for mutual assistance in the collection of taxes. South Africa has also entered into a number of tax information exchange agreements, eight of which are currently in force (namely with the Bahamas, Bermuda, Cayman Islands, Gibraltar, Jersey, Liberia and San Marino) and a further 19 of which are in the process of completion.

Tax information exchange agreements are typically concluded where one of the contracting states has a different tax base or no tax at all. In addition, the multilateral Convention on Mutual Administrative Assistance in Tax Matters, as amended by the provisions of the Protocol amending the Convention on Mutual Administrative Assistance which entered into force of 1 June 2011 (the Convention), came into effect in South Africa on 1 March 2014.3 Currently, 64 countries have signed either the original or the amended Convention. Following the completion of domestic ratification procedures in these signatory states, the Convention will apply in all 64 member states.

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