CIPC and SARS align to eradicate non-compliance at all levels

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Jashwin Baijoo | Head | Strategic Engagement & Compliance | Tax Consulting SA | mail me |


If you hold “beneficial ownership” in relation to a company, you should already be aware of the new “beneficial ownership register” functionality now on the Companies and Intellectual Property Commission (CIPC)’s e-services platform.

What you may not however be aware of, is that the South African Revenue Service (SARS) has aligned with this functionality, introducing system changes from 23 June 2023. This includes the Income Tax Return for Companies (ITR14), now encompassing a Share Register to be completed, with details of classes of shares, and full disclosure of the holders of these shares, per class.

Whilst taxpayers may consider the CIPC disclosures as more administrative than anything else, SARS coming to the party, makes it evident that the organisations have aligned in making “non-compliance hard and costly”.

What this means

At a high-level overview whilst encompassing the basics, what this means is that any person who, in relation to a company, either “ultimately owns that company or exercises effective control of that company”, is considered to hold “beneficial ownership” in that company.

This includes, but is not limited to persons who:

  • Hold a beneficial interest in shares of the company;
  • 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; or
  • 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.

If you fall into any of the above categories, or in some other fashion, exercise direct or indirect control over the operations of a company, close corporation, or another form of legal entity, active steps must be taken immediately, to ensure compliance. Bear in mind, the deadline for declaration of beneficial ownership, is October 2023, being just around the corner.

Compliance net cast wide

The days of just being some “warm body” or “silent partner”, sitting behind and exercising control over the management of assets of value, and complex ownership structures, are behind you now.

With the support of SARS, the beneficial ownership register must tie in to the ITR14 declaration on shareholding – remember, in light of automatic exchanges of information in place with a number of foreign jurisdictions, it is likely that SARS are already privy to all interests held by taxpayers, both locally, and offshore.

In casting their net as wide as possible, the concept, and required disclosures of beneficial ownership, extends to an assortment of legal entities, including profit companies, non-profit companies, external companies, non-exempt state-owned companies, listed companies and close corporations.

Over and above the register itself, being created, and maintained on a regular basis, where any person holds more than 5% beneficial ownership in a legal entity, full disclosure on their beneficial ownership is required by both the CIPC, and SARS.

Inter-organisational eradication of non-compliance

With SARS’ well known “strategic intents” borne in mind, the CIPC implementation of the beneficial ownership register can be seen as a pre-cursor for SARS’ international crackdown on non-compliance.

You may ask yourself what the end goal is – total eradication of non-compliance, by making it both hard and costly for taxpayers thinking they can play by their own rules.

The fast-changing compliance landscape is no coincidence, and aligns itself with not only SARS’ Strategic Intent, but also with the enhanced Approval International Transfer – good luck transferring dividends offshore where you have not transparently disclosed your “beneficial ownership” interests!

It may come across as randomised and sudden new compliance changes, but this is far from true. To the astute tax professional with their ear to the ground, SARS, with the help of CIPC, and numerous foreign jurisdictions, is building an all-encompassing compliance net, catching both big and small fish alike!

Don’t let the eradication, be your extermination

Be it with CIPC, SARS, or the Financial Intelligence Centre, the party bearing the onus of compliance is ultimately the taxpayer.

Where a failure to uphold this compliance burden, in the case of the new “beneficial ownership” requirement, the window opens to regulators and law enforcement agencies to launch investigation into both the legal entity, as well as its directors. This will result in the imposition of severe fines, and in the case of a director, potentially a disqualification to act as such.

Where uncertain of your, or your company’s compliance status, it is prudent to approach an astute corporate and tax attorney, to run a diagnostic on both your CIPC and SARS affairs. Not only does this ensure legal professional privilege on all disclosures, but also being specialists in their own right, guarantees the correct remedial measures are executed post-haste.


 



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