WeeklySA_AdminCOMPLIANCE: With the SA taxman tightening its links with global transparency frameworks, the era of offshore tax evasion is over, says international tax lawyer…
By Michael Kransdorff
SARS has acquired a powerful new weapon in its compliance arsenal. It is now laying the groundwork to access information on South African taxpayers’ foreign property holdings — long the last remaining blind spot in global tax transparency.
With implementation expected around 2029, South Africans with offshore real estate have a clear multi-year window to regularise their affairs before automatic reporting begins.
Last week South Africa joined 24 other jurisdictions in signing a groundbreaking international agreement that will give SARS unprecedented visibility into offshore real estate.
The Multilateral Competent Authority Agreement on the Exchange of Readily Available Information on Immovable Property (IPI MCAA) is the final major piece of the global transparency framework. It targets one of the few remaining asset classes where significant wealth could still remain outside automated cross-border reporting systems.
For over a decade, South African taxpayers have watched the walls of financial secrecy steadily collapse. First came the Common Reporting Standard (CRS), implemented internationally from 2017, which automated the exchange of financial account information. Then came the Crypto-Asset Reporting Framework in 2022, ensuring that even digital assets could no longer slip through the net.
But real estate remained largely outside this system. SARS could see your offshore bank accounts, investment portfolios, and cryptocurrency holdings — but that apartment in Lisbon, holiday home on the Spanish coast, or rental flat in London sat in local land registries that were never part of CRS reporting. The IPI MCAA changes that decisively.
How the new framework works
The framework operates through two modules, each designed to address different compliance challenges.
Module 1 focuses on ownership visibility. Once South Africa activates its bilateral exchange relationships with participating countries — expected from 2029 onwards — SARS will receive a one-off transmission of all historical foreign property holdings for which data exists in local registries.
This will include purchase prices, acquisition dates, property characteristics, and, in many jurisdictions, reported current valuations where available from domestic datasets.
Going forward, there will be annual automatic reporting of all new foreign property acquisitions by South African tax residents.
Module 2 targets property income. SARS will receive annual reports on disposal transactions (sales), including capital gains realised, as well as recurring rental income from foreign properties.
Crucially, the data includes beneficial ownership look-through information, even where properties are held via companies, trusts, nominees, partnerships, or other intermediated structures.
The 25 countries already in the net
The initial signatories include many of the most popular South African investment and expat destinations: Belgium, Brazil, Chile, Costa Rica, Finland, France, Germany, Greece, Iceland, Ireland, Italy, Korea, Lithuania, Malta, New Zealand, Norway, Peru, Portugal, Romania, Slovenia, Spain, Sweden, and the United Kingdom (including Gibraltar).
Notably absent is the United States, although US financial accounts remain reportable under FATCA.
The list is expected to grow as OECD pressure builds and more jurisdictions move to close remaining transparency gaps.
The regularisation window
Although the framework has been signed, South Africa must still complete its domestic legislative process and activate bilateral relationships. Because of this, the first exchanges are only expected around 2029, creating a practical multi-year regularisation window for taxpayers to get their affairs in order.
This is not a window to be wasted.
The difference between voluntary disclosure and forced discovery cannot be overstated. Under the existing Voluntary Disclosure Programme (VDP), taxpayers who come forward proactively can receive reduced penalties and avoid criminal prosecution.
Consider a typical Institute for International Tax and Finance VDP client: a South African tax resident who bought an investment apartment in Lisbon in 2018. The purchase was funded from after-tax South African income, but the rental income was never declared to SARS and the asset was never reported on the foreign asset schedule of their tax return.
When Portugal and South Africa activate bilateral exchanges in 2029, SARS will receive:
• details of the 2018 acquisition (from the one-off retrospective reporting),
• annual data on rental income (from 2029 onwards),
• any future disposal information.
SARS will then algorithmically trace the funding flows. Where did the funds originate? Was it declared? Was the correct exchange control permission obtained? Were the rental receipts disclosed?
SARS regularly shares information with the South African Reserve Bank’s Financial Surveillance Department, meaning potential exchange control consequences also arise. Penalties and interest can escalate quickly once SARS initiates an audit.
This development forms part of SARS’ wider Tax Administration 3.0 modernisation project. In the current tax year, SARS has already secured over R130 billion from enhanced compliance activities — a figure that continues to grow each year.
SARS’ analytical systems now integrate data from multiple domestic and international sources, identifying mismatches algorithmically and flagging high-risk taxpayers for review. Once automated property data begins flowing from dozens of jurisdictions, these analytics will become exponentially more powerful.
What taxpayers should do now
The message is unambiguous: use the regularisation window. Following are the four steps to prioritise:
Review all foreign property interests
Include direct holdings, trust-held assets, company-held properties, nominee arrangements, and any beneficial ownership rights. The new framework reports all of these.
Assess historical compliance
Were property acquisitions funded from declared, after-tax income? Was exchange control approval obtained? Have rental profits been disclosed annually? Are foreign assets correctly reflected on returns?
If gaps exist, seek voluntary disclosure
VDP remains the safest route to regularisation before automated reporting begins.
Understand ongoing obligations
Even once regularised, foreign property ownership carries annual income tax and capital gains tax reporting responsibilities.
Since the 2008 global financial crisis, the world has moved inexorably toward comprehensive tax transparency. Bank secrecy has collapsed. Look-through reporting has become the norm. Structures that once provided anonymity are now routinely penetrated to identify the ultimate beneficial owner.
The Organisation for Economic Co-operation and Development (OECD), a forum for developed democracies with market economies to collaborate on policy and related issues, estimates that more than 30 000 high-net-worth individuals have come forward under voluntary disclosure programmes since CRS was announced, yielding over R2,8 trillion in additional global tax revenue.
South Africa has been an active and enthusiastic participant in this transparency revolution — and with good reason. The fiscus needs every rand of legitimate revenue it can collect.
The era of offshore tax evasion is over. For South Africans with undeclared foreign property, this is the moment to come clean. – GoLegal
• Michael Kransdorff is a Harvard-educated international economist and a CA (SA) and a registered South African tax practitioner with a unique understanding of both the local and offshore environment
