Broad-based black economic empowerment (“BEE”) transactions are often complex and require specialised tax knowledge to avoid any unnecessary adverse tax consequences.
Similarly, when the South African Revenue Service (“SARS”) exercises its tax collection mandate, it is likely to obtain information on taxpayers’ BEE compliance. It should therefore not come as a surprise that on 21 May 2018 a Memorandum of Understanding (“MOU”) was concluded between the B-BBEE Commission (“Commission”) and SARS.
The Commission has several functions, which includes promoting compliance with the B-BBEE Act, receiving and investigating complaints, and maintaining a register of major BEE transactions, above a threshold (currently R25 million) determined by the Minister of Trade and Industry.
The purpose of the MOU is to:
- establish co-operation between SARS and the Commission regarding programs that may directly compliment or supplement one another;
- refer matters of deemed contraventions that impact on each party’s duties and mandates for consideration and resolution;
- identify, discuss and recommend common strategies in areas of co-operation;
- leverage resources by sharing resources, information and expertise for common beneficial purposes that will enhance both parties’ organisational strategies and mandates, subject to compliance with legislation.
The MOU sets out the roles and responsibilities of both parties and how they can assist each other. SARS has agreed to, where necessary, share information with the Commission insofar as it will be consistent with its confidentiality requirements. It has further agreed to share with the Commission information relating to possible fronting practices or non-compliance with the B-BBEE Act.
The Commission, on the other hand, has agreed to provide SARS with information, upon request insofar as it would be consistent with the confidentiality requirements in the B-BBEE Act in relation to:
- major BEE transactions concluded;
- ownership and management control details relating to BEE transaction entities;
- complaints received by the Commission concerning BEE transactions;
- any other relevant information that will enable SARS to conduct checks on the service providers’ tax compliance.
Importantly, the Commission has also agreed to share information with SARS on suspicious illegal activities that may potentially impact revenue collection.
The MOU comes into effect on 21 May 2018, and endures for a period of 3 years unless terminated earlier by either party giving 30 days written notice. In this new dawn of co-operation between SARS and the Commission it is important taxpayers obtain professional tax and BEE advice, not only before entering into a BEE transaction, but on a regular basis and when necessary to ensure that they remain compliant with both the B-BBEE Act and tax legislation.
This article has been written by Graeme Palmer, a Director in the Commercial Department of Garlicke & Bousfield Inc
NOTE: This information should not be regarded as legal advice and is merely provided for information purposes on various aspects of tax law.