“I recently read in the news that the B-BBEE Commission and SARS have entered into a memorandum of understanding. I’m wondering though what these government entities would have in common and why they would want to work together. Can you shed some light on this?”

The B-BBEE Commission was established with the powers to oversee the overall implementation of B-BBEE in South Africa including reviewing BEE transactions entered by South African businesses. Given the strategic benefit of being BEE compliant, many businesses are entering into transactions which fall within the purview of the B-BBEE Commission as regulator of BEE transactions.

It is therefore not surprising that a memorandum of understanding was reached between the B-BBEE Commission and SARS during May 2018, particularly as the B-BBEE Commission has reached similar agreements of co-operation with the Competition Commission, Commission for Employment Equity, the Companies and Intellectual Property Commission, South African National Accreditations System and the National Gambling Board since 2017.

The aim of the co-operation agreement between the B-BBEE Commission and SARS is to:

• Establish co-operation regarding programmes that may directly complement or supplement each other.
• Refer matters of deemed contraventions that impact on each party’s duties and mandate for consideration and resolution.
• Identify, discuss and recommend common strategies and areas of co-operation.
• Share resources, information and expertise that will enhance the organisational strategies and mandates of both parties.

In terms of the memorandum, SARS will share information with the B-BBEE Commission regarding possible fronting practices, non-compliance with the B-BBEE Act and such other information as it may deem necessary, subject to any applicable confidentiality requirements.

In turn, the B-BBEE Commission will provide SARS with information relating to possible suspicious or illegal activities that may impact revenue collection. The B-BBEE Commission will also share information, upon request, relating to major B-BBEE transactions (exceeding R25 million), ownership and management details relating to B-BBEE transactions, complaints received regarding B-BBEE transactions and other relevant information that can assist SARS to conduct tax compliance checks on the entities involved.

This closer working relationship between SARS and B-BBEE Commission requires that parties to a B-BBEE transaction should now make absolutely sure that both the BEE and tax aspects of their transaction are compliant and that the necessary advisors have been consulted in relation to their transaction.