Following South Africa’s grey listing by the Financial Action Task Force there has been a spate of new legislation to tighten the anti-money laundering and terrorist financing laws. There have been amendments to both the Companies Act and the Trust Property Control Act, to introduce the concept of beneficial ownership. Registries have been created where companies are obliged to declare their beneficial ownership to the Companies and Intellectual Property Commission (CIPC), and Trusts to the Master of the High Court.

The concept of beneficial ownership will soon be included in tax laws through an amendment to the Tax Administration Act (TAA). Treasury has said that beneficial ownership is crucial for tax administration because it helps to ensure transparency and accountability in financial transactions. By identifying the individuals who are ultimately benefitting from an asset or income, the South African Revenue Service (SARS) can accurately determine tax liabilities and prevent tax evasion, which information may also assist other authorities in the investigation of money laundering and other illicit activities.

Beneficial ownership information will allow for international cooperation and the exchange of tax related information between jurisdictions. Such cooperation will allow for the detection of cross border tax evasion and will also ensure that taxpayers fulfil their tax obligations in the appropriate jurisdictions.

The Tax Administration Laws Amendment Bill proposes that a new definition of beneficial ownership be included in the TAA. The meaning assigned to the beneficial owner of a company and a trust will align with the definitions in trust and company legislation.

It is proposed that section 70 of the TAA be amended allowing SARS to disclose information to CIPC, the Master and the Directorate for Nonprofit Organisations (NPO) and enable cross verification of beneficial ownership information between these authorities.

The proposed amendment suggests that SARS, CIPC, the Master and the NPO Directorate intend to work with each other in sharing information. For example, all trusts are obliged to register for tax and file a tax return with SARS each year. By accessing the Master’s beneficial ownership register SARS may easily determine which trusts are non-compliant. Similarly, there are many companies that should be registered for VAT but are not.

Companies are required to disclose to CIPC their annual turnover when filing their annual return. Such information would be useful to SARS in determining whether they should be registered for VAT.

South Africa is entering into a new age of transparency. It is important that taxpayers are compliant and up to date with their beneficial ownership and tax compliance obligations to prevent SARS verifications, audits, or investigations.   


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