Amnesty for returning funds

2003-02-26 15:09

Cape Town - South Africans who in the past illegally stashed money offshore have been offered an amnesty by government allowing them to repatriate the funds without facing prosecution.

Finance Minister Trevor Manuel announced in his Budget speech on Wednesday that those filing for relief would be released from all civil penalties and criminal liabilities.

However, the money would be subject to a percentage charge that would be used to help fund black economic empowerment over the next five years.

Although exchange control contravention could not be condoned, the government recognised this had taken place in the past for a variety of reasons.

"At the same time, many South Africans with funds held illegally offshore are realising that foreign markets do not present the nirvana they sought, and that South Africa offers both higher returns and lower risks than they perceived.

"They wish to bring these funds back to South Africa, but are unable to do so without risk of prosecution," he said in the National Assembly on Wednesday.

They would also be released from all income taxes, interest and civil penalties stemming from the failure to disclose gross income or capital gains from foreign sources, Manuel said.

Those willing to apply for the amnesty must do so between May 1 and the end of October.

In return, the individuals will be expected to pay a five percent exchange control charge on money returned to South Africa, or a ten percent charge on assets left offshore.

There will be no charge for money that can be legally held offshore under normal exchange control limits.

"Going forward, there is no excuse for individuals to be in contravention of exchange controls or taxation on foreign income and assets," Manuel said.

National Treasury officials declined to speculate on Wednesday on how much money could return to the country.

The minister also announced that the "blocked rands" accounts of emigrants - estimated at between R10bn and R12bn - would be unwound.

The accounts hold emigrants money that was in excess of their emigration allowance.

Manuel said the distinction between the "settling-in" allowance for emigrants and the private individual foreign investment amount for residents would fall away.

In future, amounts for emigrants of up to R750 000 per individual, and R1.5m for family units, would be allowed to leave without charge.

Holders of blocked assets wishing to take out more than that amount would have to apply to the Reserve Bank for approval. The money would be subject to an exiting charge of 10%, he said.

There was also good news for institutional investors, with a move to prudential regulation.

Long term insurers will be allowed to invest up to 15% of total assets offshore, and pension funds up to 20%.

The new dispensation will come into effect from May 1.

In addition, local companies will be able to invest up to R1-billion - up from R500m - outside Africa, and dividends repatriated from foreign subsidiaries should be eligible for an exchange control credit, allowing them to be re-exported for foreign direct investment.

Manuel said the tax on foreign dividends had an unintended effect of discouraging dividend flows.

"In order to eliminate this disincentive, the tax on foreign dividends will be removed where a South African taxpayer has a meaningful interest in the foreign subsidiary paying the dividend," he said.

However, the tax exemption for a foreign-owned gold share company would be removed from January 1, 2004.

- SAPA