Many businesses enter into tax-planning transactions without realising that certain arrangements may have to be reported to SARS under the Tax Administration Act.
A reportable arrangement is broadly a transaction, scheme, operation, agreement or understanding that meets specified statutory requirements and may provide a tax benefit, such as reducing, avoiding or postponing tax, or increasing a tax refund.
When should you be concerned?
An arrangement may potentially be reportable where it involves:
• Tax-dependent financing costs, interest or fees
• Certain tax avoidance characteristics
• Significant accounting and tax mismatches
• Little or no reasonable pre-tax profit
• A tax benefit that exceeds the expected pre-tax profit
• Certain prescribed share buy-back or hybrid equity arrangements
• Certain qualifying arrangements involving non-resident service providers
Importantly, not every tax-saving transaction is automatically a reportable arrangement. The specific requirements in the Tax Administration Act and SARS notices must be considered.
What is the reporting deadline?
Where an arrangement is reportable, the relevant participant generally has 45 business days to report it to SARS, subject to the applicable rules and possible extension.
Reporting is generally made using the RA01 Reportable Arrangement form through SARS eFiling.
What should businesses do?
Before implementing a significant tax-planning transaction, ask:
“Does this arrangement create a tax benefit, and could it fall within the reportable arrangement rules?”
A proper assessment should be documented before proceeding.
At Alerts Professional Services, we recommend that businesses incorporate a Reportable Arrangement Assessment into their tax planning and compliance processes.
Don’t wait until SARS asks questions. Assess the transaction before implementing it.
If your business is considering a significant restructuring, financing arrangement, share transaction or other tax-planning strategy, professional tax advice should be obtained before implementation.
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