Last chance for SA expatriates to come clean with SARS

South Africans living or working abroad can no longer avoid the long arm of SARS. Under pressure to meet its revenue quotas, the tax authority has started auditing the country’s non-compliant expatriates in earnest.

“We have been warning expatriates that this was coming and now that it’s here, the time for hiding one’s head in the sand is over,” says Jonty Leon, Legal Manager (Expatriate Tax) at Tax Consulting SA.         

He advises those intending to relocate to another country to follow the formal exit procedures and, most importantly, ensure their tax affairs are in order beforehand. He also advises that those that have already left permanently, should ensure that they have done so in a compliant manner, and have had themselves noted as non-resident for tax purposes.

Gone, but not forgotten

Whether a South African must declare their worldwide income and pay tax on it to SARS is determined by their tax residency status, not their physical location or period outside the country. Leon states, “Tax residency of South Africa is not determined solely on the amount of time spent in the Republic, this is a far more complex issue which must be technically dealt with in terms of the law.”

The safest route to remove ambiguity on tax residency status is to follow the formal financial emigration process. This process is being changed and a new more stringent regime will be implemented from 1 March 2021.  

This may come as a shock to those who believe that, once they set foot on foreign soil, they are free from any further tax obligation to South Africa. More so for those who left the country without settling their tax debt, even if they have been gone for decades.

“With stricter legislation to back its efforts and an emerging system of global financial data sharing as wind in its sails, SARS is more than capable of detecting taxpayers who historically flew under its radar,” says Leon.

The warning signs

According to Leon, several warning signs arose over the past year.

The first was changes to the expatriate tax laws that came into effect on 1 March 2020, soon after SARS launched its dedicated Foreign Employment Unit, which is focused on South Africans working abroad.

The second warning was the announcement that the current financial emigration law would be amended, which in the past has been successful in confirming with SARS and SARB one’s non-resident status. The change will inherently make it more difficult to cease tax residency and with a new and, as yet, undisclosed replacement process on the horizon, there has been a massive influx of applications to beat the deadline. 

The third sign was the removal of the term “wilfully” from the Tax Administration Act when dealing with non-compliance, giving SARS greater leverage to prosecute anyone claiming negligence when failing to meet their tax obligations. This is in line with the reasoning for the change in the expatriate tax legislation previously, where the rife tax non-compliance of South Africans abroad was noted during Parliamentary sessions in August 2017.

Lastly, SARS has begun a two-pronged attack strategy:

–          Firstly, through audits calling for individual expatriates to prove they are non-residents and justify their intentions – some audits calling for proof that the taxpayer had obtained an Emigration Tax Clearance Certificate when leaving South Africa; and

–          Secondly, by audits on offshore income revealed through the common reporting standard (CRS). According to Leon, this comes as no surprise, as SARS is targeting those who have historically been able to “hide” assets and funds, but which will no longer be possible due to the exchange of information between jurisdictions.

Options

Leon says South African expatriates and those wishing to emigrate still have several options available to them.

For one, they can urgently apply for financial emigration until March 2021. “National Treasury confirmed that applications submitted prior to that date will be processed under current legislation,” he says.

They can also take advantage of any double tax agreement between their chosen country and South Africa. As the tax implications of such agreements vary between jurisdictions and the fact that these agreements do not apply automatically to the taxpayer, they should seek advice from an expatriate tax expert.

Above all, if an expatriate is not tax compliant, they can approach SARS under the Voluntary Disclosure Programme to pay their back taxes along with interest and penalties but without prosecution. This process must also be undertaken very carefully, as specific requirements must be met.

“SARS has the advantage now, so waiting to see what happens is a course of action I do not recommend,” says Leon.



Latest


18 Jan 2021
SA failed to get its act together on vaccines: here’s how

By Shabir A. Madhi, University of the Witwatersrand South Africa has an estimated population approaching 60 million. To achieve herd immunity against COVID-19,…

SA failed to get its act together on vaccines: here’s how

By Shabir A. Madhi, University of the Witwatersrand South Africa has an estimated population approaching 60 million. To achieve herd immunity against COVID-19, the government recently set the ambitious goal of vaccinating 67% of the population – roughly 40 million people. According to the outline of this plan, this would be achieved within 2021. But…

18 Jan 2021
Foreign holdings of nominal SAGBs increase to 35.7% in December

By RMB Research According to the National Treasury (NT), combined holdings (fixed-rate and inflation-linked) of government bonds increased to 29.9%…

Foreign holdings of nominal SAGBs increase to 35.7% in December

By RMB Research According to the National Treasury (NT), combined holdings (fixed-rate and inflation-linked) of government bonds increased to 29.9% in December from 29.7% in November. Nominal (fixed-rate) SAGBs: Investor holdings as at the end of December 2020 are as follows:Non-resident investors hold 35.7% (R791.78bn).Monetary authorities hold 22.6% (R501.79bn).Official pension funds…

18 Jan 2021
Getting to grips with private market investments

Investors put their money in expert hands to grow it through investments in shares, bonds, cash and property. These are traditional investment…

Getting to grips with private market investments

Investors put their money in expert hands to grow it through investments in shares, bonds, cash and property. These are traditional investment types available on the stock exchanges of most public markets. However investors can also choose to invest in alternative investments – available in private markets. This gives them access to investment types that are not available…

12 Jan 2021
Steven Nathan steps down as CEO of 10X Investments

After 15 years at the helm, 10X Investments’ founder and CEO Steven Nathan has resigned, effective 31 December 2020, in…

Steven Nathan steps down as CEO of 10X Investments

After 15 years at the helm, 10X Investments’ founder and CEO Steven Nathan has resigned, effective 31 December 2020, in order to pursue other interests.  This is according to a statement issued today. The statement says: In line with 10X’s succession plans, the company’s Executive Chairman, Henk Beets, will assume responsibility…


Top stories


10 Sep 2020
How too much choice is draining your brain

By: Paul Nixon, head of technical marketing and behavioural finance at Momentum Investments From the words of Francis Scott Key…

How too much choice is draining your brain

By: Paul Nixon, head of technical marketing and behavioural finance at Momentum Investments From the words of Francis Scott Key that dubbed America “The land of the free”, which stuck, to the unforgettable Mel Gibson monologue where an army of painted Scots were willing to trade their lives for the…

13 Apr 2020
Investors should keep a reasonable investment allocation outside of SA

MoneyMarketing asked Roland Gräbe, the head of Tailored Fund Portfolios at Old Mutual Wealth, about offshore investments in the COVID-19…

Investors should keep a reasonable investment allocation outside of SA

MoneyMarketing asked Roland Gräbe, the head of Tailored Fund Portfolios at Old Mutual Wealth, about offshore investments in the COVID-19 environment and what form a global market recovery will take.

13 Apr 2020
SA’s Proposed Covid-19 Disaster Management Tax Relief

The National Treasury recently issued the draft Disaster Management Tax Relief Bill (Bill) for public comment by 15 April. The…

SA’s Proposed Covid-19 Disaster Management Tax Relief

The National Treasury recently issued the draft Disaster Management Tax Relief Bill (Bill) for public comment by 15 April. The draft Bill, together with its explanatory memorandum, provides clarity with regards the tax relief measures President Cyril Ramaphosa announced on 23 March.

10 Apr 2020
When the going gets tough, farmers are on familiar territory

South African farmers are old hands at adapting to uncertain and daunting circumstances, and our local agricultural industry has proved…

When the going gets tough, farmers are on familiar territory

South African farmers are old hands at adapting to uncertain and daunting circumstances, and our local agricultural industry has proved to be most enterprising in acclimatising to challenges as they arise.


Visit the official COVID-19 government website to stay informed: sacoronavirus.co.za