The second-round peer review report on South Africa’s implementation of standards on the exchange of information on request was published by the OECD’s Global Forum on 9 November 2022. The report notes that South Africa is largely compliant with the standard.
The first peer review report in 2013 had recommended monitoring of the availability of ownership information on partnerships, particularly where at least one partner is a trust.
The latest report notes that there has been monitoring of partnership ownership information, in particular where one or more partners are trusts, but there is concern about the effectiveness of the monitoring. The supervision and enforcement procedures do not necessarily ensure that the ownership and accounting information is available, and up-to-date at all times, in line with the requirements of the standard. The report also notes that there are also issues to be resolved in relation to beneficial ownership information for relevant entities and arrangements.
The first-round peer review report had recommended that South Africa should continue to expand its network of agreements for the exchange of tax information. The latest report notes that South Africa now has a wide network of EOI agreements; and the Multilateral Convention for Mutual Administrative Assistance in Tax Matters entered into force in relation to South Africa in 2014.
Recommendations
Beneficial ownership information is available through the operation of South Africa’s anti-money laundering (AML) rules which require entities that have a reporting obligation to collect beneficial ownership information when customer relationships begin, and to keep the information updated. The definition of beneficial ownership in relation to companies is in line with the standard, but in the case of partnerships and trusts it is not clear if beneficial owners will always be correctly identified if those beneficial owners are non-natural persons. The report recommends that the legislation in South Africa should be amended to ensure that the beneficial owners of partnerships and trusts are always correctly identified, as required by the standard. South Africa also needs to strengthen the supervision and enforcement procedures to ensure beneficial ownership information is accurate and up to date.
As beneficial ownership information is available under the AML rules, the information will be available for entities only if they have an ongoing engagement with AML-obliged persons. The report recommends that South Africa must take steps to ensure that beneficial ownership is available in relation to all entities and arrangements.
Exchange of information in practice
The peer review report notes that South Africa has put in place a dedicated, centralised EOI unit and has established adequate procedures for handling requests. The report assesses that South Africa has effectively exchanged information, providing all the information requested in almost all cases. There is however room for improvement in the speed at which requests are dealt with and in providing the requesting authority with updates on the status of the handling of their request.
