Pretoria, 26 March 2015 – An intergovernmental agreement (IGA) to improve international tax compliance and to implement the U.S. Foreign Account Tax Compliance Act (FATCA) was signed by the South African Minister of Finance, Mr Nhlanhla Nene and U.S. Ambassador to South Africa Mr Patrick H. Gaspard on 9 June 2014.
The IGA, which is an international tax agreement under the Tax Administration Act 2011, was approved by both Houses of Parliament in terms of section 231(2) of the Constitution and entered into force on 28 October 2014.
In terms of the IGA and Public Notices 508 and 509, published in Government Gazette 37778 on 27 June 2014 under the Tax Administration Act, South Africa’s financial institutions are required to maintain records, collect and submit a return containing the information referred to in the IGA, to SARS with effect from 1 July 2014.
In maintaining records and collecting the information, financial institutions must comply with the due diligence requirements as mandated by the Tax Administration Act and set out in the prescribed Business Requirement Specification: Foreign Account Tax Compliance Act Automatic Exchange of Information (BRS: FATCA AEOI) return required under Public Notice 509.
SARS will exchange information with the U.S. Treasury through a process of automatic exchange of information under Article 26 of the Convention for the Avoidance of Double Taxation and Prevention of Fiscal Evasion that exists between the two countries. The legal framework for the implementation of the IGA is therefore completed and firmly in place.
SARS has been working closely with industry bodies to ensure that all financial institutions are fully prepared to comply with the reporting requirements under the IGA and that deadlines will be met. In addition, SARS has also published a draft general guide on the implementation of the IGA to provide further assistance to financial institutions.
The first reporting period in terms of the IGA closed on 28 February 2015. South African financial institutions are required to submit the required information for the period from 1 July 2014 to 28 February 2015 to SARS by 30 June 2015. SARS, in turn, will exchange the information with the U.S. Treasury by 30 September 2015. Thereafter, the required information must be submitted annually at the end of May for the reporting period ending February.
The implementation of the IGA remains on track and SARS is confident that all parties will be ready to meet the relevant deadlines.
The implementation of the IGA is an important stepping stone for South Africa in preparation for Automatic Exchange of Information in terms of the Common Reporting Standard, which is the Global Model for automatic exchange of information. South Africa is one of the early adopters of the standard and has committed to commence exchange of information automatically on a wider front from 2017.