Reportable Arrangements Under the TAA: An Overview

• Jurisdiction: South Africa
• Author: Michael Rudnicki Rudnicki
• DOI: 10.10520/ejc-btclq_v13_n1_a5
• Published date: 01 March 2022
• Date: 01 March 2022
• Pages: 27-34
• Published By: Siber Ink

27

© Siber ink

Reportable Arrangements

Under the TAA:

AN OVERVIEW

MICHAEL RUDNICKI*

ABSTRACT

This article deals with the rules relating to Reportable Arrangements contained

in sections 34 to 39 of the Tax Administration Act, No. 28 of 2011 (‘TAA’). The

objective of the rules is to provide SARS with an early warning tool in respect of

transactions that may give rise to concern and possibly contain features of tax

avoidance. The article does not deal with specific Reportable Arrangements

which have to be reported, having been listed by the Commissioner in a

notice published in the Government Gazette pursuant to section 35(2) of

the TAA.

The article deals with the following issues:

• Who must report

• Qualifying features of a reportable arrangement

• When to report

• Failure to report

An arrangement is reportable to SARS by a ‘participant’. A ‘participant’ is

defined to include a person who derives or assumes that the person will

derive a ‘tax benefit’ or a ‘financial benefit’, or is a ‘promoter’.

‘Tax benefit’ is defined in section 34 of the TAA as ‘the avoidance, post-

ponement, reduction or evasion of a liability for tax’. A ‘tax benefit’ exists

where a taxpayer anticipates a future tax liability and implements an arrange-

ment to step out of the way of, escape or prevent the anticipated tax liability.

‘Financial benefit’ is defined as ‘a reduction in the cost of finance, including

interest, finance charges, costs, fees and discounts on a redemption amount’.

The definition is ambiguous, but the context seems to suggest a reduction

in transaction costs or fees which is associated with a tax outcome. The term

‘promoter’ is in turn defined as ‘a person who is principally responsible for

organising, designing, selling, financing or managing the “arrangement’.

The words ‘principally responsible’ suggest a person that has authority and

control over a transaction or series of transactions and not necessarily a legal

advisor.

The rules then stipulate various characteristic of transactions which reflect

degrees of abnormality. The precursor, though, is that the taxpayer is a

‘participant”’. The abnormal characteristics are the following:

• Interest charges dependent on tax assumptions

• Characteristics contained in the GAAR provisions:

—Round-trip financing

—Accommodating or tax-indifferent parties

—Elements that have the effect of off-setting or cancelling each other

* Tax Executive, Bowmans Attorneys.