Certain transactions or arrangements must be reported to the South African Revenue Service (SARS) within 45 business days after the date on which the arrangement qualifies as a ‘reportable arrangement’ or within 45 days of a taxpayer becoming party to a reportable arrangement. This is in terms of the Tax Administration Act No. 28 of 2011 (“the TAA”). This mandatory disclosure enables SARS to review the arrangement and interpretation against the relevant tax and legal framework.
Reportable arrangements are set out in sections 34 to 39 of the TAA read together with section 212 of said Act. The reporting requirement is based on the presence of certain characteristics or features. Section 212 of the TAA specifically covers the penalties regarding the non-disclosure of reportable arrangements.
An ‘arrangement’ is a reportable arrangement as set out in terms of section 35(1) and (2) of the TAA. It includes arrangements where a ‘tax benefit’ is or will be derived or is assumed to be derived by any ‘participant’ due to the ‘arrangement’. A ‘participant’ is defined as any person who is a party to a listed ‘reportable arrangement’ while a ‘promotor’ includes a person who is mainly responsible for organising, designing, selling, financing or managing the ‘reportable arrangement’.
By the specified date the following information in respect of a ‘reportable arrangement’ must be submitted to SARS on the designated reportable arrangements RA01 form:
- a detailed description of all its steps and key features, including, in the case of an ‘arrangement’ that is a step or part of a larger ‘arrangement’, all the steps and key features of the larger ‘arrangement’;
- a detailed description of the assumed ‘tax benefits’ for all ‘participants’, including, but not limited to, tax deductions and deferred income;
- names, registration numbers, and registered addresses of all ‘participants’;
- a list of all its agreements; and
- any financial model that embodies its projected tax treatment.
The RA01 form plus supporting documents and enquiries must then be emailed to reportable@sars.gov.za.
SARS has a dedicated team who will assist taxpayers where necessary.
The following arrangements have been identified as reportable arrangements by SARS:
- An arrangement that would have qualified as a “hybrid equity instrument” in terms of section 8E of the Income Tax Act, 1962, if the prescribed period in that section had been 10 years, but does not include any instrument listed on an exchange regulated in terms of the Financial Markets Act, 2012 (Act No. 19 of 2012);
- An arrangement in terms of which—
- a company buys back shares on or after the date of publication of this notice from one or more shareholders for an aggregate amount exceeding R10 million; and
- that company issued or is required to issue any shares within 12 months of entering into that arrangement or of the date of any buy-back in terms of that arrangement;
- An arrangement in terms of which—
- a person that is a resident makes any contribution or payment on or after 16 March 2015 to a trust that is not a resident and has or acquires a beneficial interest in that trust; and
- the amount of all contributions or payments, whether made before or after 16 March 2015, or the value of that interest exceeds or is reasonably expected to exceed R10 million, excluding any contributions or payments made to or beneficial interest acquired in any—
- (i) portfolio comprised in any investment scheme contemplated in paragraph (e)(ii) of the definition of “company” in section 1(1) of the Income Tax Act, 1962; or
- (ii) foreign investment entity as defined in section 1(1) of the Income Tax Act, 1962;
- An arrangement in terms of which- one or more persons acquire the controlling interest in a company on or after the date of publication of this notice, including by means of acquiring shares, voting rights or a combination of both, that—
- (i) has carried forward or reasonably expects to carry forward a balance of assessed loss exceeding R50 million from the year of assessment immediately preceding the year of assessment in which the controlling interest is acquired; or
(ii) has or reasonably expects to have an assessed loss exceeding R50 million in respect of the year of assessment during which the controlling interest is acquired; or - directly or indirectly holds a controlling interest in a company in paragraph (a);
- (i) has carried forward or reasonably expects to carry forward a balance of assessed loss exceeding R50 million from the year of assessment immediately preceding the year of assessment in which the controlling interest is acquired; or
- An arrangement between a person that is a resident and a person that qualifies as an insurer in terms of any law of any country other than the Republic (hereinafter referred to as the foreign insurer) in terms of which—
- an aggregate amount that exceeds or is reasonably expected to exceed R5 million has been paid or becomes payable by the resident to the foreign insurer; and
- any amount payable on or after 16 March 2016, in cash or otherwise, to any beneficiary in terms of that arrangement is to be determined mainly by reference to the value of particular assets or categories of assets that are held by or on behalf of the foreign insurer or by another person for purposes of that arrangement; and
- An arrangement for the rendering to a person—
- that is a resident; or
- that is not a resident that has a permanent establishment in the Republic to which that arrangement relates, of consultancy, construction, engineering, installation, logistical, managerial, supervisory, technical or training services, in terms of which—
- (i) a person that is not a resident or an employee, agent or representative of that person—
- (aa) was or is physically present in the Republic; or
- (bb) is anticipated to be physically present in the Republic, in connection with or for purposes of rendering those services; and
- (ii) the expenditure in respect of those services under that arrangement—
- (aa) incurred or to be incurred, on or after the date of publication of this notice, exceeds or is anticipated to exceed R10 million in aggregate; and
- (bb) does not qualify as remuneration for purposes of the Fourth Schedule to the Income Tax Act, 1962.
- (i) a person that is not a resident or an employee, agent or representative of that person—
The following arrangements is specifically excluded as reportable arrangements under section 36(4) of the TAA:
- An arrangement referred to in section 35(1) of the TAA, is an excluded arrangement if the aggregate tax benefit which is or may be derived from that arrangement by all participants to that arrangement does not exceed R5 million.
- An arrangement referred to in section 35(1)(c) of the TAA, is an excluded arrangement if the tax benefit which is or will be derived or is assumed to be derived from that arrangement is not the main or one of the main benefits of that arrangement.
If you have any enquiries, please do not hesitate to contact Petri Westraadt at pwestraadt@fhbc.co.za
Source Reference:
• Government Gazette No. 39650 (3 February 2016)
• SARS Reportable Arrangements circular dated 9 February 2022
• Tax Administration Act No. 28 of 2011