As you are no doubt aware the Financial Action Task Force (FATF), an international organisation tasked with combatting international money laundering and the financing of terrorism, has recently identified several deficiencies in the legislative framework and fiscal management of South Africa as a jurisdiction. As a result have Grey listed South Africa.
This Grey listing has serious implications for international trade, foreign investment, international travel and a slew of everyday business operations and on line activities.
Since early December various government departments have been amending applicable legislation and regulations in order to comply to FATF recommendations. The target being to update and improve the South African fiscal framework to the extent that the grey listing can be removed before the deadline of 2025.
These legislative changes have implications for every business operating in South Africa but unfortunately there is very little official effort to make the changes known. We have where possible been tracking the amendments to legislation as it effects our business and our clients. We have detailed the most important below along with some basic advice on compliance.
CHANGES TO FICA
At this stage the most important changes effect the Financial Intelligence Centre Act (act 31 of 2001) and the scope of business activities which require registration with the FIC. This is the act which specifies FICA and the annoying verification of your FICA information by Banks, on a regular basis. The scope of the act has been expanded so that we, as your accountants are now included as an Accountable Enterprise and will have to, in future collect, collate and verify the FICA information of all of our clients. We apologise in advance for the impending paperwork storm as we will have to request updated copies of addresses and ID documents from all of our clients.
More important for our clients is the requirement for any business which issues invoices for more than R100,000 register with the FIC. We initially thought that this would be limited and that there may be certain exemptions as all but 3 of our clients who fall into that category essentially trade with listed companies or through banks for exported goods. This has turned out to not be the case.
If your business issues single invoices for more than R100,000 you will be required to register with the FIC as an accountable institution. Please contact us for advice on the registration and the implications for your business.
CHANGES TO THE REGULATIONS OF THE MASTER OF THE HIGH COURT.
The Master of the High Court, custodian of all matters relating to trusts has amended their regulations and the Trustees of a Trust are now required to submit a schedule reflecting the Beneficial Ownership of the Trust. This change was announced by an article published on the Master’s website. Not something that appears regularly on the average persons browsing history.
We discovered the change last week and also discovered that the deadline for submission was Friday 28th April.
In order to avoid penalties we took the decision to submit the required returns to The Master using the information we already had on file. These submissions are largely incomplete but should suffice to avoid the penalties associated with missing the deadline.
Our staff will contact you over the next two weeks to update information and to obtain your approval to make the necessary changes to submissions.
CHANGES AT SARS.
At this stage the only significant changes relate to Trusts. The administration of Trusts has been tightened up and minutes and record keeping is now a serious issue. Your trust will be required to submit a separate return to SARS each year, detailing activity and distributions made during the previous year. These distributions will be prepopulated to the returns of beneficial owners and will not be allowed as deductions unless the vesting was minuted during the correct year. Distributions to beneficiaries who are foreign residents will now be taxed in the trust at the much higher rates applicable. This will mean that the financial planning for Trusts will have to be concluded before the end of the financial year, most sensibly while completing the February provisional tax returns.
The additional administration and cost of compliance makes it non-sensical to keep and maintain Trusts that have no specific purpose. Please contact us to discuss.
In the past we have submitted recurring nil returns for many Trust, as the process of deregistration at SARS and the Masters Office was difficult and expensive. The changes in legislation and the tightening of regulations make that impossible in the long term and these trust will have to be closed down.
CHANGES AT THE COMPANIES AND INTELLECTUAL PROPERTY COMMISSION (CIPC)
As you are no doubt aware, shareholding in Private (Pty) companies was never reported to the CIPC. Records of shareholding and the transfers of shareholding were maintained in the Company Share Register which is kept at the Companies registered office. We have always referred to these share registers as “The Big Red Book” and in the main update the records as required and keep the registers at our office.
Changes to the Companies Act now require that all Companies submit their shareholding as well as an organogram detailing the ultimate beneficial owner of the Company to the CIPC. These changes came into effect in April and all returns need to be submitted within 6 months.
We will be contacting you during the next month to confirm beneficial ownership and shareholding and the submission of the information to the CIPC.
Future changes to shareholding or beneficial ownership will have to be reported to the CIPC within 5 days of the change taking place.
CONCLUSION
We do not believe that the memo above contains all of the changes that we will see during the next few months and there may well be others already in place of which we are not yet aware. We will however try to keep up with the changing environment and advise of those changes that impact your compliance status as soon as we find out about them. We would appreciate your assistance in this regard. Please share any information that crosses your desk. We will happily investigate, follow up and verify. Please take any requests for FICA information seriously to avoid closure of accounts and inconvenience caused by non-compliance seriously.
A WORD OF CAUTION.
We have no doubt that the darker side of our economy will be out there taking advantage of the confusion which always follows changes of this nature. The POPIA and POPI acts, for example lead to the proliferation of fly by night organisations seeking to profit from the provision of dubious and mostly unnecessary services and consulting.
In addition you may receive requests for FICA information from organisations who have no right to the information or who request far more information than actually required in terms of the act.
Always make sure that the requesting organisation can provide a valid FIC registration number before providing any information. When in doubt please check with our office, we are as always happy to assist.