Plenty has happened since our last correspondence regarding the Grey Listing of South Africa by the Financial Action Task Force (FATF). We are now well into the changes that have resulted from that Grey Listing, the expansion of the reach of Financial Intelligence Centre, the additional information requirements from the Master of the High Court regarding Trusts, amendments to section 55 of the General Laws Amendment Act, amendments to the Companies Act and Regulations and last, but certainly not least, changes to information required by SARS.
These changes have had a major effect on compliance for Companies and Individuals and unfortunately on the cost of compliance. In keeping with our commitment to transparency, where fees are concerned, and my personal aversion to nasty surprises of any nature, we have decided to detail some of the most important changes and the cost implications. As some of these are major, particularly for clients with multiple companies, we recommend that, if you have a problem with these changes and the charges that result you contact the partner responsible for your work to discuss.
ADDITIONAL INFORMATION REQUIRED BY THE CIPC
For the first time ever, beneficial ownership of companies will now have to be disclosed to the Companies and intellectual property commission (CIPC). In the past, shareholder information was recorded in the Share Register which was kept at the registered office and was only available to the public on application and after payment of a nominal search fee.
The CIPC has now created a new database which will record the Beneficial Ownership of all companies registered in South Africa. At present this data base in open for uploading information but not for sharing that information. This will no doubt change in the future, placing shareholder information in the public domain.
The deadline for the submission of Beneficial Ownership Information is 31 October 2023. Thereafter any changes to the Beneficial Ownership will need to be recorded at the CIPC within 5 Working days of the change. Please note that “change” could be something as small as a change of address!
THE PROCESS
The information is provided electronically to the CIPC. This has to be done by an agent registered with the CIPC, however, that agent requires a mandate signed by a director of the company submitting the information.
Our staff will be contacting you over the next few weeks to obtain the mandate and also to make sure that the information contained in our records is correct.
This will also give you an opportunity to raise queries if any and to discuss the cost.
THE COST
We have had to invest in additional staff capacity, IT infrastructure and a verification service subscription in order to comply with the new FATF FIC requirements. We estimate that the submission of the Beneficial Ownership information for our clients will take approximately 1230 hours of additional work which is equivalent to 30 weeks of screen time. This is a substantial new cost which we cannot absorb.
We will be charging R2,600 per company with two or fewer shareholders and an additional amount or R75 for each additional share holder. Where clients have more than two companies with similar shareholding there is a limited saving relating to the preparation of information and we will pass on discounts in those cases. It is not our intention to profit from this situation simply to recover cost.
As always, we are happy to discuss with you if required.
ADDITIONAL INFORMATION REQUIRED FOR COMPANY TAX RETURNS
COMPANY TAX RETURNS
IT14’s have been amended to include information relating to shareholding. This is a first. This information was never required in the past and is in line with the new CIPC requirements.
The new return requires that each shareholder be listed along with Id Number, income Tax Number and an email address. Our staff will be asking you for that information during the next few months. We do not anticipate problems with our existing clients but will ask you to assist where there are shareholders who are not also clients of our practice.
In general, information relating to your Income Tax Profile needs to be taken very seriously. Failure to notify SARS of small changes like addresses, email addresses etc can result in big penalties under the Income Tax Administration Act along with whatever sanctions the CIPC choose to throw into the pot.
Please keep us up to date. We will assist with updates and changes to the SARS RAV and CIPC databases as long as you keep us in the loop
INDIVIDUAL TAX RETURNS.
Individual tax returns now require the disclosure of personal assets and liabilities for all but salary earners. This is a major change in information required and is going to require a great deal of additional work. Assets and liabilities have to be stated at cost, not at market value. This exercise needs to be done with care and due diligence. For example, when calculating Capital Gains tax, the base cost of an asset can be deducted from the proceeds of disposal. If you have, for years, disclosed the cost of your home, for Asset and Liability purposes at it’s original cost but on selling you want to add the cost of multiple additions over the years……you are going to have real problems……
In addition to the above, if you are considered by SARS to be a high net worth individual, any person who is the beneficial owner of assets in excess of R50 million, you are required to submit additional information about specific assets, at market value. We will engage with you individually should we believe that you fall into this category. Please monitor this situation as we are not always aware of all of your assets, particularly those held overseas.
We are insisting that our accounting staff collect the information relating to assets and liabilities at the same time as they prepare your financial statements. Please assist them with this issue.
TRUST TAX RETURNS
Trust tax returns now require that resolutions relating to the distribution of income be uploaded on submission of the return. SARS have made it very clear that distributions vested after the year end will not be accepted and that the trust will be liable for taxation. In order to deal with this problem we will be paying close attention to the affairs of Trusts going forward and will be adding additional questions to the provisional tax submissions of Trusts in February each year.
You also need to bear in mind that no distributions made to non-resident beneficiaries after 31 July 2023 will be allowed for tax purposes and that once again, as in the case of CGT the Trust will have to pay the tax at Trust Tax rates.
IN CONCLUSION
The changes listed above and the more stringent compliance environment in which we find ourselves is new to us all. While we will make every effort to keep up to date and to keep you abreast of new requirements, we need to work through the morass together. Some of the new legislation is subject to varying interpretation with lawyers and accountants offering differing opinions and disagreeing more than usual. Please feel free to discuss the effects of the changes and to share additional information that crosses you desk. We are always happy to learn and debate interpretation.