Participants are obliged to submit, in a prescribed form, information to SARS within 45 days of the arrangement qualifying as reportable. Upon receipt of this information, SARS will issue the participant with a reference number for administrative purposes only.
In addition to the reportable arrangements already set out in the Act, section 35(2) allows SARS, by public notice, to identify arrangements which may lead to an undue tax benefit, as reportable.
On 16 March 2015, SARS published such a notice identifying reportable arrangements, where:
It does not automatically follow that a participant who is obliged to report an arrangement to SARS will be subject to tax. SARS has, however, clearly identified these transactions as arrangements that can create tax liabilities. By placing a reporting obligation on the participants to the arrangements, it allows SARS to be made aware of the transactions at an early stage, and if necessary, they can be investigated.
Participants face heavy penalties when they fail to disclose information on reportable arrangements. A participant can become liable for penalties up to R100,000 for each month that he has failed to disclose this information. These penalties may be doubled or tripled depending on the tax benefit received by the participant.