AUTOMATIC EXCHANGE OF INFORMATION (FATCA and CRS)

What's new?

30 June 2017 - AEOI Administrative Penalties – If you are a Reporting Financial Institution (RFI) and you have missed the deadline of 31 May 2017 to report to SARS the financial information with respect to reportable accounts and declaration under the US Foreign Account Tax Compliance Act (FATCA) and the OECD Common Reporting Standard (CRS), you may be liable for penalties. For more information on penalties, see our AEOI Penalties.

What is Automatic Exchange of Information (AEOI)?

On this page, you will find:
  • What is AEOI?
    • AEOI under FATCA
    • AEOI under CRS
    • Differences between FATCA and CRS
  • Who must report?
    • Reporting Financial Institutions
    • Individuals and Businesses
  • What must be reported?
  • When must it be reported?
  • How must it be reported?
  • Need help?
This information is required by law (US Foreign Account Tax Compliance Act (FATCA) and the OECD Common Reporting Standard (CRS)) to be collected by financial institutions around the world for reporting to tax authorities. Tax authorities will exchange this information to help make sure everyone pays the right amount of tax.

As part of the administration of the tax Acts as set out in the South African Tax Administration Act, SARS may provide administrative assistance to foreign governments under an international tax agreement, such as a Double Tax Agreement (DTA) or other multilateral or bilateral information exchange agreements between South Africa and foreign countries. In turn, these foreign countries may also provide similar administrative assistance. The three forms of information exchange between tax authorities are spontaneous exchange, exchange of information on request (EOIR) or automatic exchange of information (AEOI).

AEOI involves the systematic and periodic transmission of “bulk” taxpayer information by the source country to the residence country concerning various categories of income. In addition, information concerning the acquisition of significant assets may be used to evaluate the net worth of an individual, to see if the reported income reasonably supports the transaction. As a result, the tax authority of a taxpayer’s country of residence can check its tax records to verify that taxpayers have accurately reported their foreign source income or assets. Thus AEOI has a deterrent effect on tax evasion and promotes voluntary compliance.

Greater transparency and AEOI between tax administrations is an important step forward in countering cross border tax evasion, aggressive tax avoidance and base erosion and profit shifting (BEPS) through, for example, transfer pricing arrangements. As a result AEOI has become a new international standard, in addition to EOIR.

There are four building blocks that need to be in place for a jurisdiction to implement AEOI, see What are the requirements for AEOI implementation.
 
 
South Africa is an early adopter of the new international standards for AEOI which include both FATCA and the CRS:
  • AEOI under FATCA
In 2010 the United States in an effort to enhance tax compliance by US citizens in foreign jurisdictions or those with offshore accounts, introduced the Foreign Account Tax Compliance Act (FATCA). The reporting regime under FATCA requires foreign financial institutions (FFIs) to report information to the US Internal Revenue Service (IRS) relating to US account holders. To effect this, the US introduced a model intergovernmental agreement (IGA). The FATCA IGA is an agreement between the government (tax administration) of the US and those of other countries. Such an IGA was signed between South Africa and the US and reporting South African financial institutions must comply with the requirements and obligations set out in the IGA from 1 July 2014.
 
The US/SA FATCA IGA provides for SA FFIs to identify and report information with respect to each US reportable account to SARS. FATCA applies to an entity that is a financial institution as described in the IGA that maintains financial accounts where the account holder is a—
  • Specified U.S. person; or
  • Passive entity with controlling persons that are specified U.S. persons.
The accounts of these persons are FATCA reportable accounts, meaning the FFIs must report the information prescribed in the IGA to SARS. SARS will in turn share the information with the US IRS and has done so since 2015.
 
  • AEOI under the CRS
In 2014, the Organisation for Economic Cooperation and Development (OECD), working with G20 countries, developed the Standard for Automatic Exchange of Financial Account Information in Tax Matters (the Standard), which encompasses  the OECD’s Common Reporting Standard (CRS). The Standard requires Financial Institutions of CRS countries (referred to as “participating jurisdictions”) to determine and report financial account information of account holders that may be tax resident in a foreign jurisdiction (other than the US, as this is regulated by FATCA) to their tax authority. This information is then automatically exchanged between SARS and its CRS exchange partners on an annual basis, if there is an information exchange agreement in place. If no such agreement is in place SARS must retain the information until it has such an agreement in place.
 
To maintain as much commonality as is possible the Standard draws on the intergovernmental approach to implementing FATCA, but does not always follow it due to the differences between bilateral and multilateral approaches. It is, however, much wider than FATCA.
 
The OECD Automatic Exchange of Information (AEOI) portal provides a comprehensive overview of the work of the OECD and the Global Forum on Transparency and Exchange of Information for Tax Purposes (GFTEI) in the area of AEOI, in particular with respect to the CRS. To date, more than 100 countries (illustrated below) will be exchanging information under the CRS.
 
In September 2017, 50 countries will be taking part in the annual AEOI to assist with domestic tax compliance, which will grow to 100 in September 2018. The OECD is also actively seeking the participation of more countries in the CRS. See the current list of CRS participating jurisdictions.
 
 
For the differences between FATCA and CRS, click here.


Who must report?

  • Financial Institutions:
For purposes of the FATCA IGA: In terms of the IGA, Financial Institutions that must apply the prescribed due diligence requirements to find reportable accounts and report the prescribed information, include South African banks and custodians, brokers, asset managers, private equity funds, certain investment vehicles, long-term insurers and other participants in the financial system. A SA Financial Institution must determine if it has a reporting obligation in terms of the FATCA IGA.

Entities which are exempt beneficial owners or deemed compliant FFIs and the accounts which are excluded from the definition of Financial Accounts are described in Annexure II of the IGA.

For purposes of the CRS: Financial Institutions resident in SA (referred to as Reporting Financial Institutions or RFIs) that must apply the prescribed due diligence requirements to find reportable accounts and report the prescribed information, include any Financial Entity (whether a legal entity or legal arrangement such as a trust or partnership) that is a Custodial Institution, a Depository Institution, an Investment Entity, or a Specified Insurance Company. Certain Financial Institutions or financial accounts are specifically excluded under the CRS. The CRS Regulations gives a general description of excluded FIs or accounts. Specific exclusions are listed in Annex 1 and Annex 2 to the regulations.

In general, South African financial institutions must identify accounts held by customers who are foreign tax residents or entities connected to foreign tax residents. These financial institutions must report these accounts to us as SARS. We will then report the account information to the respective foreign tax authorities.
Similarly, foreign financial institutions must identify their South African tax resident customers and report their accounts through their local tax authorities to us as SARS.
  • Individuals and Businesses:

      •  If you have an existing account
If you have an existing account, your financial institution may contact you to confirm your country or countries of tax residence. This is to establish whether you have any accounts that need to be reported under the FATCA or the CRS laws.
Your financial institution may also contact you if their records indicate that you could be a foreign tax resident. This might be because you have provided an address or other information for a country outside South Africa.
  • If you open a new account
From 1 March 2016, your financial institution must ask you to certify your residence for tax purposes if you open a new account. They may ask you to provide forms and documentation. This will apply for most types of financial accounts.
If you are a foreign tax resident, you will need to provide your tax reference number or equivalent. This is the number used to identify you to the tax authority in the foreign country. If you don’t have one, you will be asked to provide a reason. See also the OECD rules on Tax Identification Numbers in different countries.
  • Accounts held by entities (such as companies, trusts, partnerships, associations)
If you are opening a new account on behalf of a legal entity or arrangement (such as a trust, partnership, company or association), from 1 March 2016 your financial institution must obtain information from you about:
    • the tax residence of the entity
    • the nature of the entity’s business
    • in some circumstances, the individuals who control or beneficially own the entity or have specific connections to the entity. This includes their tax residency and their tax reference number or equivalent if they are a tax resident outside South Africa.
Your financial institution may also contact you for this information for your existing accounts. This will help them comply with their obligations under the FATCA and the CRS laws.
See more information on:
 

What must be reported?

 
For FATCA, the information required to be reported for an account is described in Article 2 of the FATCA IGA. For the CRS, the information required for account reporting is described in Section I of the CRS Regulations, as interpreted by the CRS Commentary.
A financial account is a reportable account if it is held by one or more reportable persons (individuals) or by a Passive NFE entity with one or more controlling persons that is a reportable person (individual).
The following financial account information must be reported:
  • The name and an identifying number of the RFI (its South African income tax reference number)
  • The account number of the reportable account (or if no account number, a functional equivalent)
  • The account balance or value (in the currency in which the account is denominated) at the end of the 12 month reporting period or:
    • If closed during the period a) the balance as at one day before its closure and b), the fact of its closure.
    • If the balance or value of an account is nil or a negative amount, for example where an account is overdrawn, the RFI must report the balance or value as nil.
  • The following information dependent on the type of account:
    • Depository Account - the gross amount of interest paid or credited to the account during the 12 month reporting period.
    • Custodial Account - the gross amount of interest, dividends and other income generated with respect to assets held in the account paid or credited to the account during the reporting period, and the gross proceeds from the sale or redemption of Financial Assets (CRS) or property (FATCA) during the 12 month reporting period.
    • For any other account, the total gross amount paid or credited to the account holder in relation to the account during the reporting period with respect to which the RFI is the obligor or debtor, including the aggregate amount of any redemption payments made to the account holder during the 12 month reporting period.
The following information of each reportable person must be reported:
  • Name
  • Address
  • If an individual, their date of birth
  • If an individual, their place of birth i.e. town or city (unless the RFI does not have this information or is not required under SA law - for example FICA - to obtain such information, in which case the country of birth of the individual must be reported)
  • Jurisdiction(s) of residence (jurisdictions to be reported under the CRS and that are identified by the RFI through applying the due diligence procedures – see also the OECD’s tax residency rules)
  • Taxpayer identification numbers (TINs) issued by the jurisdiction(s) of residence (see the OECD's Tax Identification Numbers which has information on the usage and structure of TINs as submitted by each participating jurisdiction).
A nil return must be filed by an RFI that did not maintain any reportable accounts during the relevant reporting period.
 

When must it be reported?

 
AEOI submissions for both FATCA and CRS are due annually by 31 May of each year.
 
Under the FATCA IGA, RFIs were initially required to submit a return by the later of 10 July 2015 (the date of Public Notice 597) or the dates for submitting the returns under Public Notice 509, i.e. 30 June 2015 (for the first reporting period of 1 July 2014 to 28 February 2015) and 31 May for subsequent tax years (every reporting  period after the first reporting period).
 
Under the CRS return notice, RFIs must submit CRS returns for every reporting period commencing 1 March and ending the last day of February the following year, by 31 May of each year commencing in 2017.
 
If the deadlines are not adhered to, penalties may apply. Public Notice 597 lists the incidences of non-compliance subject to administrative penalties. For more information, go to AEOI Penalties.
 
Reporting financial institutions (RFI) required to submit AEOI Third Party returns have the following statutory obligations under section 26 of the TAA:
  • Submit the returns by the date specified in the public notices, namely the FATCA return notice and CRS return notice.
  • Submit the returns in the prescribed form and manner and containing the information prescribed by the AEOI BRS and the FATCA IGA & CRS Regulations.
  • Ensure that the return is a full and true return.
  • For purposes of providing the information required in the return, comply with the due diligence requirements as may be prescribed in a tax Act, an international tax agreement (such as the FATCA IGA), an international tax standard (such as the CRS) or by the Commissioner in a public notice consistent with the international tax agreement or the international tax standard.
 

How must it be reported?

 
Reporting Financial Institutions are required to submit either a data file or a NIL file  with their prescribed information and then the correlating declaration (FTI-02 form) to conclude their reporting obligations. The following process should be applied:
 
Alternatively, if you have a NIL file submission this can be done via eFiling using an FTI-01 form.
 
Step 2: If you have not already been enrolled, you need to enrol for Third Party Data Submission. You may use either:
Step 3: To test your data file on the SARS Trade Test Platform.
Request access from Third Party Data Support (follow the steps prescribed in the trade testing setup guide).
 
Step 4: Submit the data on SARS Production Platform using your preferred channel as per step 2 above.
 
Step 5: Declare a summary of data submitted on eFiling via the FTI-02 form.
Note – the reporting process is only concluded once the correlating declaration is submitted.
 
 

Special Voluntary Disclosure Programme

In the 2016 Budget Speech, the Minister of Finance announced a Special Voluntary Disclosure Programme (SVDP) to give opportunity for non-compliant taxpayers to voluntarily disclose offshore assets and income. With the new international tax standards for AEOI between tax authorities providing SARS with additional information from 2017, time is now running out for taxpayers who still have undisclosed assets abroad.

The SVDP came into effect on 1 October 2016 and SARS and the South African Reserve Bank (SARB) have established a joint application process and a single point of entry for applications which can be accessed on the SVDP webpage. South African taxpayers who have not yet regularised their position with respect to their offshore financial assets are reminded that the SVDP ends on 31 August 2017.

For taxpayers who want to know more, there is a SDVP Guide as well as more information regarding the Exchange Control SVDP.
 
For more information:

Need more help?

Should you need more help, please send an email to 3rd Party Data Support: Bus_Sys_CDSupport@sars.gov.za.
 

 

Automatic Exchange of Information (AEOI) Documents​ ​& Information
​BRS for the Automatic Exchange of Information (AEOI) version 2.0.0-25 for submission by end May 2017
​FTI Test File – CRS Null File Structure for Testing Purposes
​FTI Test File – CRS File Structure for Testing Purposes
FTI Test File – FATCA Null File Structure for Testing Purposes
​FTI Test File – FATCA File Structure for Testing Purposes
​FTI Test File – FATCA & CRS File Structure for Testing Purposes
​​Guide on the U.S. Foreign Account Tax Compliance Act (FATCA)
​​​Government notice on the agreement between South Africa and United States of America (USA)
Provisions which form an integral part of the FATCA IGA in terms of Article 7 thereof
Public Notices 508 and 509 published in Government Gazette 37778 on 27 June 2014
Exchange of Information Agreements (IGA published in Government Gazette 38466 on 13 February 2015)
    
Last Updated: 31/07/2017 3:53 PM     print this page
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