South Africa has signed an agreement that requires sharing of information between the local tax authorities of different countries about financial accounts and investments.
The Common Reporting Standard (CRS) is an information-gathering and reporting requirement for financial institutions in participating countries/jurisdictions, to help fight against tax evasion and protect the integrity of tax systems. Compliance with CRS is required in South Africa by law by financial institutions.
The Common Reporting Standards (“CRS”) is an Organisation of Economic Co-Operation and Development (“OECD”) initiative that encourages the exchange of information on a global scale between revenue authorities to ensure completeness of income reported by taxpayers who have investments outside their country of tax residence. The CRS is a spin-off from US Foreign Account Tax Compliance Act (“FATCA”) that requires tax reporting on US investors or entities controlled by US investors who hold financial accounts outside the US where non-US participating jurisdictions have entered into agreements to do so.
CRS is a separate legal instrument to FATCA. The due diligence procedures required for the CRS and FATCA are similar, but the way the data will be reported to SARS is the same.
First World Trader (hereafter referred to as FWT - trading as EasyEquities) is a Reporting Financial Institution which is required to report to the South African Revenue Services (SARS) specific information with respect to each Reportable Account it manages, after application of the due diligence procedures as described in the Regulations1.
The due diligence procedures require FWT to identify the jurisdiction in which an account holder or a controlling person of a Passive Non-Financial Entity is resident for the purposes of any tax imposed by the law of that jurisdiction.
FWT must therefore obtain a self-certification either as part of its account opening process or where a change of circumstances occurred with respect to a Financial Account. The information allows FWT to reasonably determine the Account Holder’s residence(s) for tax purposes and confirm the reasonableness of such self-certification based on the information obtained, including any documentation collected pursuant to AML/KYC Procedures.
1Regulation No. R. 1070 of 09 October 2020 and Intergovernmental Agreement between the United States of America and South Africa (FATCA); and CRS Multilateral Competent Authority Agreement (CRS MCAA) of 2014.
South Africa entered into an agreement with the United States to improve international tax compliance and to implement the Foreign Account Tax Compliance Act (FATCA). The date of entry into force was 28 October 2014.
South Africa is also a party to the Multilateral Convention on Mutual Administrative Assistance on Tax Matters as well as a number of bilateral tax information exchange agreements. As a signatory to the Multilateral Competent Authority Agreement on Automatic Exchange of Financial Account Information, also referred to as the Common Reporting Standard (CRS), South Africa enacted domestic enabling legislation. The first exchange date was September 2017. South Africa also has bilateral CRS agreements with Hong Kong, Qatar, and Singapore. South Africa has also entered into a number of Bilateral Country-by-Country (CbC) Competent Authority Agreements to exchange CbC reports.