New SARS Guide on Reportable Arrangements
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SARS has issued a new external guide on Reportable Arrangements effective from 10 November, based on the rules in sections 34–39 of the Tax Administration Act. These sections create a legal obligation to tell SARS when a transaction is structured in a way that could create a big tax saving or delay paying tax. The purpose of this reporting is early warning to SARS providing visibility of the transaction before the tax effect happens. SARS wants to know upfront when transactions are designed, structured or priced in ways that create large tax benefits, defer tax, or rely on specific tax assumptions to work. This allows SARS to identify tax avoidance risk early, long before assessments, audits or disputes.
The guide makes it very clear that SARS expects early reporting of potentially aggressive tax planning or high-risk structures before tax disputes arise.
Who must report these arrangements to SARS?
This is the legal requirement from Sections 37 and 38 of the TAA:
“every person who is a ‘participant’ of an arrangement which derives or will derive any tax benefit in terms of a ‘reportable arrangement’ has a duty to report that arrangement to the Commissioner”
A tax practitioner falls within this definition by virtue of designing, organising, selling or enabling the arrangement (“promoter”).
When must it be reported?
Within 45 business days of the arrangement becoming reportable, or of the person becoming a participant. (A further 45 business days may be granted if justified.) Submission is done via eFiling using the RA01 form, with supporting documentation (agreements, description of steps, tax benefit model, etc.).
What is NOT reportable?
Not everything is reportable. Standard loans, normal leases, listed securities transactions and ordinary CIS transactions are generally excluded, provided there is no structured tax benefit, and provided the aggregate tax benefit is under R5 million.
Impact on tax practitioners
This is a compliance risk area. The penalties for non-reporting are harsh: up to R50 000 per month (participants) or R100 000 per month (promoters), doubled if the tax benefit exceeds R5m and tripled if it exceeds R10m.
Clients will not know what “reportable arrangement” means, so you need to screen transactions. The trigger is almost always present where a structure is priced or shaped around an anticipated tax outcome (for example: interest priced depending on whether a deduction is allowed, share buy-backs linked to new placements, contributions to foreign trusts, large cross-border expenditure on services, acquisition of companies with large assessed losses, etc.). In other words: when the deal only makes sense because of the tax effect, this is where you need to check for reportability.
Bottom line
Reportable Arrangement rules are now being actively refreshed and enforced. Build this screening into your advisory and transaction review workflows — because SARS is clearly preparing to use this regime as a proactive counter-avoidance tool.
