On 26 October 2016 Pravin Gordhan, Minister of Finance, tabled the Rates and Monetary Amounts and Amendment of Revenue Laws Bill, Bill 19 of 2016, in Parliament when he introduced the so-called “Mini Budget”. This Bill contains the legislation regulating the Special Voluntary Disclosure Programme (SVDP), which commenced on 1 October 2016 and was to end on 30 June 2017.The Bill, as tabled, confirms that the SVDP will run for nine months as opposed to the originally announced period of six months. Subsequently, on 24 November 2016, the Standing Committee on Finance extended the deadline to 31 August 2017.
Under the SVDP qualifying applicants must include, in their 2015 tax income, an amount equal to 40% of the highest amount of the rand value of the unauthorised foreign assets at the end of each year of assessment ending on or after 1 March 2010, but not ending on or after 1 March 2015. Thus, the Bill gives effect to the Treasury’s announcement in September 2016 that the inclusion rate has been reduced from 50% to 40%.
In addition, the Bill contains a provision whereby the base cost of the unauthorised foreign assets for which an application is lodged under the SVDP will be deemed to have been acquired on 28 February 2015 at a cost equal to the highest market value, in foreign currency, of that asset as determined under clause 16 of the Bill. Clause 16 refers to the manner in which the amount to be included in the applicant’s taxable income in 2015 is to be determined. This is based on the market value of the unauthorised foreign assets in the relevant foreign currency and translated into rands at the spot rate on the last business day in South Africa at the end of each year of assessment in question, namely 28 February 2011, 29 February 2012, 28 February 2013, 28 February 2014 and 28 February 2015. This is a concession to taxpayers in that the base cost of the foreign assets is effectively increased when determining the capital gain that will be liable to tax when the foreign assets are ultimately disposed of. Instead of relying on the historic cost of the foreign assets, taxpayers will be entitled to rely on the market value used to determine the tax payable on those foreign assets under clause 16 of the Bill.
Contact Fanus Jonck, Tax Consultant, at tax@jonck.net with your tax queries.
