The following rules and administrative procedures apply to ensure access to information on CRS Avoidance Arrangements and Opaque Offshore Structures for purposes of ensuring compliance with the Common Reporting Standard and the effective implementation of the anti-avoidance rules referred to in subparagraph A(1)(a) of Section X.
A. Definitions
For purposes of this Section, the following capitalised terms have the meanings set forth below. Capitalised terms that are not otherwise defined in this Section have the meanings given to them under Section VIII.
| (1) | Rule 1.1: CRS Avoidance Arrangement |
A “CRS Avoidance Arrangement” is any Arrangement for which it is reasonable to conclude that it is designed to circumvent or is marketed as, or has the effect of, circumventing CRS Legislation or exploiting an absence thereof, including through:
| (a) | the use of an account, product or investment that is not, or purports not to be, a Financial Account, but has features that are substantially similar to those of a Financial Account; |
| (b) | the transfer of a Financial Account, or the monies and/or Financial Assets held in a Financial Account to a Financial Institution that is not a Reporting Financial Institution or to a jurisdiction that does not exchange CRS information with all jurisdictions of tax residence of a Reportable Taxpayer; |
| (c) | the conversion or transfer of a Financial Account, or the monies and/or Financial Assets held in a Financial Account, to a Financial Account that is not a Reportable Account; |
| (d) | the conversion of a Financial Institution into a Financial Institution that is not a Reporting Financial Institution or into a Financial Institution that is resident in a jurisdiction that does not exchange CRS information with all jurisdictions of tax residence of a Reportable Taxpayer; |
| (e) | undermining or exploiting weaknesses in the due diligence procedures used by Financial Institutions to correctly identify: |
| (i) | an Account Holder and/or Controlling Person; or |
| (ii) | all the jurisdictions of tax residence of an Account Holder and/or Controlling Person; |
| (f) | allowing, or purporting to allow: |
| (i) | an Entity to qualify as an Active NFE; |
| (ii) | an investment to be made through an Entity without triggering a reporting obligation under the CRS Legislation; or |
| (iii) | a person to avoid being treated as a Controlling Person; or |
| (g) | classifying a payment made for the benefit of an Account Holder or Controlling Person as a payment that is not reportable under CRS Legislation; |
where it is reasonable to conclude that such Arrangement is designed to circumvent or is marketed as, or has the effect of, circumventing CRS Legislation or exploiting an absence thereof.
For the purposes of subparagraph A(1), an Arrangement is not considered to have the effect of circumventing CRS Legislation solely because it results in nonreporting under the relevant CRS Legislation, provided that it is reasonable to conclude that such non-reporting does not undermine the policy intent of such CRS Legislation.
| (2) | Rule 1.2: Opaque Offshore Structure |
| (a) | An “Opaque Offshore Structure” means a Passive Offshore Vehicle that is held through an Opaque Structure. |
| (b) | Subject to subparagraph B(2)(c) below, a “Passive Offshore Vehicle” means a Legal Person or Legal Arrangement that does not carry on a substantive economic activity supported by adequate staff, equipment, assets and premises in the jurisdiction where it is established or is tax resident. |
| (c) | A Passive Offshore Vehicle does not include a Legal Person or Legal Arrangement— |
| (i) | that is an Institutional Investor or that is wholly-owned by one or more Institutional Investors or |
| (ii) | where all Beneficial Owners of that Legal Person or Legal Arrangement are only resident for tax purposes in the jurisdiction of incorporation, residence, management, control and establishment (as applicable) of the Legal Person or Legal Arrangement. |
| (d) | An “Opaque Structure” is a Structure for which it is reasonable to conclude that it is designed to have, marketed as having, or has the effect of allowing, a natural person to be a Beneficial Owner of a Passive Offshore Vehicle while not allowing the accurate determination of such person’s Beneficial Ownership or creating the appearance that such person is not a Beneficial Owner, including through: |
| (i) | the use of nominee shareholders with undisclosed nominators; |
| (ii) | the use of means of indirect control beyond formal ownership; |
| (iii) | the use of Arrangements that provide a Reportable Taxpayer with access to assets held by, or income derived from, the Structure without being identified as a Beneficial Owner of such Structure; |
| (iv) | the use of Legal Persons in a jurisdiction where there is: |
| (aa) | no requirement to keep, or mechanism to obtain, Basic Information and Beneficial Owner information, as defined in the latest Financial Action Task Force Recommendations, on such Legal Persons that is accurate and up to date; |
| (bb) | no obligation on shareholders or members to disclose the names of persons on whose behalf shares are held; or |
| (cc) | no obligation on, or mechanism for, shareholders or members of such Legal Persons to notify the Legal Person of any changes in ownership or control; |
| (v) | the use of Legal Arrangements organised under the laws of a jurisdiction that do not require the trustees (or in case of a Legal Arrangement other than a trust, the persons in equivalent or similar positions as the trustee of a trust) to hold, or be able to obtain, adequate, accurate and current Beneficial Ownership information regarding the Legal Arrangement; |
where it is reasonable to conclude that the Structure is designed to have, marketed as having, or has the effect of allowing a natural person to be a Beneficial Owner of a Passive Offshore Vehicle while not allowing the accurate determination of such person’s Beneficial Ownership or creating the appearance that such person is not a Beneficial Owner.
(3) Rule 1.3: Intermediary
“Intermediary” means:
| (a) | any person responsible for the design or marketing of a CRS Avoidance Arrangement or Opaque Offshore Structure (“Promoter”); and |
| (b) | any person that provides Relevant Services in respect of a CRS Avoidance Arrangement or Opaque Offshore Structure in circumstances where the person providing such services could reasonably be expected to know that the Arrangement or Structure is a CRS Avoidance Arrangement or an Opaque Offshore Structure (“Service Provider”). The standard of “reasonably be expected to know” must be determined by reference to the Service Provider’s actual knowledge based on readily available information and the degree of expertise and understanding required to provide the Relevant Services. |
| (4) | Rule 1.4: Other Definitions |
For purposes of this Section, the following capitalised terms shall have the meanings set out below:
| (a) | “Arrangement” includes an agreement, scheme, plan or understanding, whether or not legally enforceable, and includes all the steps and transactions that bring it into effect. |
| (b) | “Basic Information” on a Legal Person includes, at a minimum, information about the legal ownership and control structure of the Legal Person. This would include information about the status and powers of the Legal Person, its shareholders or members and its directors. |
| (c) | “Beneficial Ownership” or “Beneficial Owner” shall be interpreted in a manner consistent with the latest Financial Action Task Force Recommendations and shall include any natural person who exercises control over a Legal Person or Legal Arrangement. In the case of a trust, such term means any settlor, trustee, protector (if any), beneficiary or class of beneficiaries and any other natural person exercising ultimate effective control over the trust, and in the case of a Legal Arrangement other than a trust, such term means persons in equivalent or similar positions. |
| (d) | “Client”, in respect of an Intermediary, means any person who requests an Intermediary to, or on whose behalf, or for whose benefit, the Intermediary: |
| (i) | makes a CRS Avoidance Arrangement or Opaque Offshore Structure available for implementation; or |
| (ii) | provides Relevant Services in respect of a CRS Avoidance Arrangement or Opaque Offshore Structure. |
| (e) | “CRS Legislation” means the Standard for Automatic Exchange of Financial Account Information in Tax Matters as implemented in the domestic laws of the jurisdiction where the relevant account, product, investment, or Arrangement is maintained and includes any international legal instrument that is in force and effect for that jurisdiction and which provides for the exchange of information collected pursuant to the Common Reporting Standard. |
| (f) | “Institutional Investor” means a Legal Person or Legal Arrangement: |
| (i) | that is regulated as a bank (including a depositary or custodial institution), insurance company, collective investment vehicle or pension fund; |
| (ii) | the shares or interests of which are regularly traded on an established securities market; |
| (iii) | that is a government entity, central bank, international or supranational organisation; or |
| (iv) | a Legal Person or Legal Arrangement wholly-owned by one or more of the foregoing. |
| (g) | “Legal Arrangement” means an express trust or other similar legal arrangement, such as fiducie, treuhand and fideicomiso. |
| (h) | “Legal Person” means any entity and can include a company, body corporate, foundation, anstalt, partnership, association and other relevantly similar entity, but does not include a natural person. |
| (i) | “Structure” means an Arrangement concerning the direct or indirect ownership or control of a person or asset. |
| (j) | “Partner Jurisdiction” means a jurisdiction: |
| (i) | that has introduced rules that are substantially similar to those set out in these Regulations; and |
| (ii) | that, with respect to the particular CRS Avoidance Arrangement or Opaque Offshore Structure, has international exchange of information instruments in effect with all jurisdictions of residence of the Reportable Taxpayer. |
| (k) | “Relevant Services” in respect of a CRS Avoidance Arrangement or Opaque Offshore Structure, means providing assistance or advice with respect to the design, marketing, implementation or organisation of that Arrangement or Structure. |
| (l) | “Reportable Taxpayer” means, in respect of a CRS Avoidance Arrangement, any actual or potential user of that Arrangement and, in respect of an Opaque Offshore Structure, a natural person whose identity as a Beneficial Owner cannot be accurately determined due to the Opaque Offshore Structure. |
| B. | Requirement to disclose CRS avoidance arrangements and opaque offshore structures |
| (1) | Rule 2.1: Obligation on Intermediary to Disclose |
Any person that is an Intermediary with respect to a CRS Avoidance Arrangement or Opaque Offshore Structure must disclose that Arrangement or Structure to the South African Revenue Service if that person:
| (a) | makes that CRS Avoidance Arrangement or Opaque Offshore Structure available for implementation, or provides Relevant Services in respect of that CRS Avoidance Arrangement or Opaque Offshore Structure through a branch located in South Africa; |
| (b) | is resident or has its place of management in South Africa; or |
| (c) | is incorporated in, or established under the laws of, South Africa. |
| (2) | Rule 2.2: When information is required to be disclosed |
The disclosure required under subparagraph B(1) shall be made 30 days after the Intermediary:
| (a) | makes the CRS Avoidance Arrangement or Opaque Offshore Structure available for implementation; or |
| (b) | supplies Relevant Services in respect of the CRS Avoidance Arrangement or Opaque Offshore Structure. |
| (3) | Rule 2.3: Information required to be disclosed by Intermediary |
The information that an Intermediary is required to disclose under subparagraph B(1) in respect of a CRS Avoidance Arrangement or Opaque Offshore Structure shall include:
| (a) | the name, address, jurisdiction(s) and TIN(s) of tax residence of the following persons: |
| (i) | the person making the disclosure; |
| (ii) | any Client of that person in respect of that Arrangement or Structure (separately identifying any Client that is a Reportable Taxpayer, including the date of birth of such persons); |
| (iii) | any actual user of a CRS Avoidance Arrangement or Beneficial Owner of an Opaque Offshore Structure; |
| (iv) | any person that is an Intermediary with respect to that Arrangement or Structure (other than the person making the disclosure). |
| (b) | the details of that CRS Avoidance Arrangement or Opaque Offshore Structure including; |
| (i) | in respect of a CRS Avoidance Arrangement, a factual description of those features of the Arrangement that are designed to have, marketed as having, or have the effect of, circumventing the CRS Legislation; and |
| (ii) | in respect of an Opaque Offshore Structure, a factual description of those features that have the effect of not allowing the accurate determination of the Reportable Taxpayer’s Beneficial Ownership or creating the appearance that the Reportable Taxpayer is not a Beneficial Owner of the Passive Offshore Vehicle; and |
| (c) | the jurisdiction or jurisdictions where the CRS Avoidance Arrangement or Opaque Offshore Structure has been made available for implementation; |
to the extent such information is within the knowledge, possession or control of the person providing the disclosure.
| (4) | Rule 2.4: No obligation for the Intermediary to disclose |
| (a) | An Intermediary shall not be required to disclose any information set out under subparagraph B(3) where that information is protected from disclosure under professional secrecy rules stipulated in domestic law, but only to the extent the disclosure would reveal confidential information held by an attorney, solicitor or other admitted legal representative with respect to a Client, as defined in the Commentary to Article 26 of the OECD Model Tax Convention. |
| (b) | An Intermediary that is not required to disclose information under subparagraph B(4) shall provide written notice to the Client of the Client’s disclosure obligations under these rules by the time specified in subparagraph B(2). |
| (5) | Rule 2.5: No obligation on Intermediary to disclose to the extent information has already been disclosed |
An Intermediary is not required to disclose any information set out in subparagraph B(3), to the extent that the Intermediary holds documentation demonstrating that:
| (a) | such information was previously disclosed to the South African Revenue Service; |
| (b) | the information relates to Relevant Services supplied, or a CRS Avoidance Arrangement or Opaque Offshore Structure made available for implementation, through a branch maintained by that Intermediary in a Partner Jurisdiction and such information has been disclosed to the tax authority of that Partner Jurisdiction; or |
| (c) | the Intermediary is required to disclose such information under subparagraph B(1)(c) and such information has been disclosed to the tax authority of a Partner Jurisdiction where that Intermediary is resident or has its place of management. |
| (6) | Rule 2.6: Reportable Taxpayer required to disclose in certain circumstances |
| (a) | Any Reportable Taxpayer that is resident in South Africa and that is a user of a CRS Avoidance Arrangement or a Beneficial Owner under an Opaque Offshore Structure must disclose to the South African Revenue Service any information on the Arrangement or Structure that is not disclosed by an Intermediary because the Intermediary is not subject to any disclosure requirements under subparagraph B(1) or is not required to disclose the information pursuant to subparagraph B(4). |
| (b) | The Reportable Taxpayer is not required to disclose any information under subparagraph B(6)(a) to the extent that the Reportable Taxpayer has received documentation from the Intermediary demonstrating that the information has been disclosed by that Intermediary to the tax authority of a Partner Jurisdiction under mandatory disclosure rules that are substantially similar to those set out in these Regulations. |
| (c) | The disclosure pursuant to subparagraph B(6)(a) shall include all the information required to be disclosed under subparagraph B(3) and be made within 30 days after the first step of the CRS Avoidance Arrangement or Opaque Offshore Structure has been implemented. |
| (7) | Rule 2.7: Disclosure of Arrangements entered into after 29 October 2014 and before the effective date of these rules |
| (a) | A Promoter shall disclose a CRS Avoidance Arrangement within 180 days of 1 March 2024 where: |
| (i) | that Arrangement was implemented on or after 29 October 2014 but before 1 March 2024; and |
| (ii) | 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.
[Section XI(B)(7)(Rule 2.7)(a) effective date for Paragraph B substituted by Notice No. R.3118, GG48165, dated 3 March 2023]
| (b) | No disclosure shall be required under subparagraph B(7)(a) where the Promoter has documentation to demonstrate that the aggregate balance or value of the Financial Account subject to the CRS Avoidance Arrangement immediately prior to its implementation was less than U.S. $1,000,000. |
| (c) | Notwithstanding subparagraph A(4)(e), for the purpose of interpreting defined terms with respect to subparagraph B(7), CRS Legislation means the Standard for Automatic Exchange of Financial Account Information in Tax Matters as published by the OECD on 15 July 2014. |
