A newly inked intergovernmental agreement will see South African financial institutions report information about US account holders to the South African Revenue Service (Sars), which would deliver the data to the US Internal Revenue Service (IRS).
The reciprocal intergovernmental agreement, signed by Finance Minister Nhlanhla Nene and US Ambassador to South Africa Patrick Gaspard on Monday, aimed to improve international tax compliance and implement the US Foreign Account Tax Compliance Act (Fatca).
As Sars relayed the required information through an automatic exchange of information to the IRS under the Double Taxation Convention, the IRS would provide similar information about South African account holders in the US to Sars.
The agreement promoted transparency between the two nations on tax matters and underscored growing international cooperation in the endeavour to end tax evasion worldwide, while alleviating the need for individual financial institutions to enter directly into an agreement with the US.
Fatca was implemented in the US in 2010 to combat offshore tax evasion by obtaining information on accounts held by US citizens in other countries.
A 30% withholding tax imposed on the foreign financial institutions failing to comply would be waived if the institutions entered into disclosure compliance agreements with US Treasury.