Mandatory Disclosure Rules


On 08 March 2018, The Organisation for Economic Cooperation and Development (“OECD”) developed and released a Model of Mandatory Disclosure Rules (MDR) Standard. This was after the G7 Finance Ministers called for the OECD to start discussions on ways to address arrangements that circumvent reporting under the Common Reporting Standard (CRS). As such, the MDR model was established to enable Tax Authorities to collect information on promotors or service providers (“intermediaries”) and users of CRS Avoidance Arrangements (whereby account holders of foreign bank accounts seek to hide their true jurisdictions of tax residency to avoid exchange of the information under AEOI to their actual jurisdiction of tax residence) and Opaque Offshore Structures (whereby account holders of foreign bank accounts that are companies or trusts seek to hide the beneficial owners of the account and jurisdiction of tax residence). South Africa updated its regulation as Gazetted on 09 October 2020, to include reporting under Mandatory Disclosure Rules which is effective from 1 March 2024.

South Africa has been on the forefront of adopting standards developed by the OECD to improve international tax compliance. Promulgation of the OECD standard for AEOI under SA domestic law, which encompasses the CRS, to include MDR requirements, endorsed South Africa’s interest to participate in ensuring the CRS is not avoided or circumvented. Information to be exchanged under MDR provides South Africa and its foreign exchange partners with additional intelligence, improves global tax compliance, will inform future tax policy design, deter implementation of arrangements for circumvention, and strengthen integrity of reporting under the CRS.

Who must submit data to SARS?

The rules require any person that is an Intermediary in respect of an arrangement, which has the hallmarks of a CRS Avoidance Arrangement or Opaque Offshore Structure, to disclose certain information on that arrangement or structure to SARS. In certain circumstances, users of the arrangement or structure that are SA tax residents are also required to disclose this information.

Intermediaries are those persons responsible for the design or marketing of the arrangement or structure (“Promoters”) as well as certain persons that help or advice with respect to the design, marketing, implementation or organisation of that arrangement or structure (“Service Providers”), in particular financial service providers.

The model mandatory disclosure rules only impose disclosure obligations on Intermediaries that have a sufficient nexus with South Africa. This will include a foreign Intermediary operating through a branch located in South Africa as well as those that are resident in, managed or controlled, incorporated, or established under the domestic laws of South Africa.

Thus, an Intermediary must disclose the prescribed information of the CRS Avoidance Arrangements or Opaque Offshore Structure to SARS if:

  • It has a branch in South Africa through which the arrangement or structure was made available or through which the services were provided
  • It is a South African tax resident or has its place of management in South Africa
  • It is incorporated or established in South Africa.

In some instances described in the regulation, a Reportable Taxpayer that is resident in South Africa and that is an actual or potential user of a CRS Avoidance Arrangement or a Beneficial Owner under an Opaque Offshore Structure whose identity is sought to be hidden because of the structure, must disclose to SARS the prescribed information on the Arrangement or Structure where this is not disclosed by an Intermediary because the Intermediary does not have the required nexus with South Africa and is, accordingly, not subject to any disclosure requirements under the MDR.

What must be reported?

The rules cover reporting of prescribed data relating to CRS Avoidance Arrangements and Opaque Offshore Structures.

 CRS Avoidance Arrangements are arrangements that are designed to circumvent, or are marketed as, or have the effect of, circumventing the Common Reporting Standard, as implemented under the domestic law of South Africa. An arrangement circumvents the Common Reporting Standard where it avoids the reporting of CRS information to all jurisdictions of tax residence of the taxpayers in a way that undermines the policy intent of the CRS.

Opaque Offshore Structures are structures that involve the use of a passive entity in a jurisdiction other than the jurisdiction of tax residence of one or more of the beneficial owners and that are designed to, marketed as or have the effect of disguising the identity of the beneficial owner(s). Amongst others, this may include the use of nominee shareholders, the exercise of indirect control over entities or the use of jurisdictions with weak rules for the identification of beneficial owners. In order to minimise reporting in low-risk situations there is a carve-out from the definition of Offshore Structure for Institutional Investors.

The information to be disclosed by the Intermediary or, if applicable, a Reportable Taxpayer resident in South Africa who is a user of the Arrangement or Structure, includes all the steps and transactions that form part of the Arrangement or Structure, including key details of the underlying investment, organisation and persons involved in the Arrangement or Structure and the relevant tax details (including actual tax residency) of the Clients and users of the Arrangement or Structure as well as any other Intermediaries, but only to the extent that such information is within the Intermediary’s knowledge, possession or control). A “Client”, in respect of an Intermediary, means any person who requests an Intermediary to, or on whose behalf, or for whose benefit, the Intermediary:

  • makes a CRS Avoidance Arrangement or Opaque Offshore Structure available for implementation; or
  • (ii) provides Relevant Services in respect of a CRS Avoidance Arrangement or Opaque Offshore Structure.

The description may include references to marketing materials, structure diagrams, presentations and other documents that provide context or explain the structure or arrangement in further detail. It should also include information on all jurisdictions where a CRS Avoidance Arrangement or Opaque Offshore Structure has been made available for implementation.

When must the information be reported? 

An intermediary that is a Promotor is required to submit an MDR report to SARS within 30 days from the date that the arrangement or structure is made available for implementation to either other Intermediaries, Clients or users. In the case of an intermediary that is a Service Provider, this means the date from which relevant services in respect of the CRS Avoidance Arrangement or Opaque Offshore Structure are supplied.

A Service Provider must disclose the arrangement or structure within 30 days once it provides Relevant Services with respect to the arrangement or structure, but only where the Service Provider knows or can reasonably be expected to know that the arrangement or structure is a CRS Avoidance Arrangement or an Opaque Offshore Structure. In this regard, the OECD provides guidance of all new identified high-risk CBI/RBI schemes Arrangements or Structures and the hallmarks thereof to assist Service Providers to recognise these Arrangements or Structures.

Pre-existing arrangements or structure entered on or after 29 October 2014 and before the CRS domestic law effective date, should be disclosed within 180 days from the date the MDR comes into effect, i.e. 1 March 2024. 

Failure to report under the MDR will result in serious administrative penalties (R100k for promotors and R50k for service providers for each month that there is a failure to report) as well as criminal sanctions.

How must the information be reported? 

MDR reporting is only available for electronic submission on the SARS eFiling platform, the Disclosing Entity will activate the MDR tax type on eFiling to enable the completion of MDR001 form. 

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