Compulsory repatriation of foreign assets

SARS may apply to court for the compulsory repatriation of a taxpayer's foreign assets if the taxpayer does not have sufficient assets located in South Africa to satisfy a tax debt in full, and SARS believes that:

• he has assets outside of South Africa; or
  
• he has transferred assets outside South Africa for no consideration or for consideration less than the fair market value,
  which may fully or partly satisfy the tax debt.

When SARS applies for such an order it may ask the court to prescribe a time period within which the assets must be repatriated. The order applies until either the tax debt has been paid, or the assets have been repatriated and utilised to satisfy the tax debt. If the taxpayer fails to repatriate the assets, he will then be in contempt of the court order and could face possible criminal sanctions. The taxpayer will however have to be given notice of the Court application and an opportunity to oppose the order SARS is seeking.

In addition to issuing a repatriation order, the court may:

• limit the taxpayer's right to travel outside South Africa and require his passport to be surrendered to SARS;
  
• withdraw a taxpayer's authorization to conduct business in South Africa;
  
• require the taxpayer to cease trading; or
  
• issue any other order it deems fit.

Our courts have not yet subjected these provisions to constitutional scrutiny. Everyone has a constitutional right to freedom of movement which includes the right to have a passport and leave the republic. Furthermore, every citizen has the right to choose their trade, occupation or profession freely. Seemingly these TAA provisions could be unreasonable limitations on these constitutional rights. However, the power to repatriate assets and make orders restricting taxpayers rights are vested in the High Court and not SARS, and therefore the process of repatriating foreign assets will be subject to judicial oversight. Nonetheless, until such time as these provisions are tested in the Constitutional Court, there will be uncertainty as to their validity.

Note: This information should not be regarded as legal advice and is merely provided for information purposes on various aspects of tax law.