South African tax warning 

The South African Revenue Service (SARS) and the Companies and Intellectual Property Commission (CPIC) are tightening compliance around beneficial ownership disclosure for the 2024 tax season. 

This follows efforts from the Financial Intelligence Centre (FIC) to tighten its grasp on money laundering conducted through real estate deals in the first few months of the year. 

These agencies are taking more aggressive action against non-compliance as South Africa tries to accelerate its efforts to get off the Financial Action Task Force’s (FATF) greylist next year. 

The National Treasury warned last week that agencies and authorities must demonstrate significant improvements in enforcing regulations to ensure the country can exit the list by June 2025. 

On 24 February 2023, South Africa was placed on FATF’s list of “jurisdictions under increased monitoring, ” known as the greylist, giving the country a list of 40 recommendations. 

In October 2023, FATF conducted an exercise to determine the country’s progress since being added to the greylist. 

It found that South Africa has made significant progress in addressing most concerns. However, it failed to adequately improve the coordination of anti-money laundering legislation and provisions relating to terrorism financing.

SARS and the CIPC have begun clamping down on beneficial ownership disclosures as part of the government’s efforts to meet these requirements. 

Jashwin Baijoo, head of strategic engagement and compliance at Tax Consulting SA, explained that at the end of last month, SARS announced its enhanced beneficial ownership disclosure process. 

Soon after, the CIPC issued a media release enforcing beneficial ownership declarations and allowing the filing of annual returns. 

Baijoo said this is part of a strategic move to eradicate non-compliance for companies, trusts, and partnerships on all levels. 

The newly implemented requirements by both organisations are far from arbitrary. They form part of an ongoing clampdown by South African authorities to help the country get off the greylist. 

These organisations are raising South Africa’s regulatory and compliance monitoring to be on par with international standards.

According to the FATF Action Plan for South Africa, under Immediate Outcome 5, beneficial ownership sharing with all authorities is highlighted as a key strategic deficiency to be remedied by September 2024.

At a high level, all individuals who either own or, in some manner, exercise control over a company are considered to hold beneficial ownership.

For the 2024 Filing Season, taxpayers in partnerships must “complete the Details of Partners (excluding yourself)” on their individual tax returns, ensuring alignment with the existing ownership requirements and prior disclosures.

This includes, but is not limited to, persons who –

• Hold a beneficial interest in the company’s shares.
• Is able to exercise voting rights and director changes in the company.
• Is able to control voting on company decisions or director changes in the company.
• Holds the power to materially influence, either directly or through a chain of control, the management of a company, or other legal entity, body of persons, partnership, or other persons acting under the provisions of a trust agreement.

This more stringent disclosure flows from the definition of “Beneficial Owner”, encompassing partners, natural persons exercising executive control, and legal or natural persons acting on behalf of the partnership.

If you fall into any of the above categories or, in some other way, exercise control over a company, steps must be taken immediately to ensure compliance with your 2024 filing season obligations, Baijoo warned. 

The CIPC and SARS require full disclosure of beneficial ownership in all legal entities, including companies, trusts, and partnerships, on both company (ITR14) and individual (ITR12) tax returns.