Updated regulations for financial institutions on reporting CRS Avoidance Arrangements

3 March 2023

Tax Administration Act, 2011: Publication details for regulation R3118, published in the Government Gazette 48165 of 3 March 2023, are now available. The regulation relates to the rules for purposes of paragraph (a) of the definition of “international tax standard” in section 1 of the Tax Administration Act, 2011 (Act No. 28 of 2011), promulgated under section 257 of the Act, on the date that the mandatory disclosure rules (MDR) take effect.

The effective date for paragraph B of Section XI of Regulations R1070 is amended to 1 March 2024. This section deals with Mandatory Disclosure Rules by financial institutions.

What needs to be done?

In terms of Rule 2.7, the Promoter should disclose a CRS Avoidance Arrangement within 180 days from 1 March 2023 where such Arrangement where:

• The Arrangement was implemented on or after 29 October 2014 but before 1 March 2023; and
• That person was a Promoter in respect of that Arrangement, irrespective of whether that person provides Relevant Services in respect of that Arrangement after the effective date.

Background

The Common Reporting Standard (CRS) is a global standard for the automatic exchange of financial account information between tax authorities.

The term “CRS avoidance arrangement” refers to any arrangement, transaction, or scheme that is designed to circumvent the reporting requirements of

Under the CRS, financial institutions must identify and report certain information about their customers’ financial accounts to the tax authorities of the customer’s country of residence. This information includes the account balance, interest income, dividends, and other income earned by the account holder.

A CRS avoidance arrangement is any arrangement designed to avoid or evade the reporting obligations under the CRS. Such arrangements may include setting up offshore accounts or shell companies in jurisdictions with low or no tax or using other methods to hide or obscure the true ownership or beneficial interest in the account.

It is important to note that CRS avoidance arrangements are illegal and can result in severe penalties and legal consequences for those involved. The South African Revenue Service (SARS) has the power to investigate and take action against those who engage in such arrangements.

You’ll be able to read more here.