South Africans dwelling or working overseas can not “keep away from” the lengthy arm of SARS. (iStock)
- SARS’ means to detect taxpayers who traditionally “flew beneath its radar” has elevated, warns a tax professional.
- A brand new, extra stringent regime to find out tax residency standing shall be applied from 1 March 2021.
- Tax residency of South Africa isn’t decided solely on the period of time spent within the nation.
The time for hiding their heads within the sand about tax is over for SA expatriates, says Jonty Leon, authorized supervisor at Tax Consulting SA.
South Africans dwelling or working overseas can not “keep away from” the lengthy arm of the SA Income Service. Stricter laws to again its efforts to gather taxes and an rising system of worldwide monetary information sharing will increase SARS’ means to detect taxpayers who traditionally “flew beneath its radar”.
“Beneath strain to satisfy its income quotas, SARS has began auditing the nation’s non-compliant expatriates in earnest. We’ve got been warning expatriates that this was coming and now that it is right here,” says Leon.
“The most secure path to take away ambiguity on tax residency standing is to comply with the formal monetary emigration course of. This course of is being modified and a brand new extra stringent regime shall be applied from 1 March 2021.”
He advises South Africans desiring to relocate to a different nation to comply with the formal exit procedures and, most significantly, guarantee their tax affairs are so as beforehand. He additionally advises that those that have already left completely, ought to guarantee they’ve executed so in a compliant method, and have had themselves famous as non-resident for tax functions.
Whether or not a South African should declare their worldwide earnings and pay tax on it to SARS is set by their tax residency standing, not their bodily location or interval outdoors the nation.
“Tax residency of South Africa isn’t decided solely on the period of time spent within the nation. This can be a much more complicated concern which should be technically handled when it comes to the regulation,” explains Leon.
“This may increasingly come as a shock to those that imagine that, as soon as they set foot on international soil, they’re free from any additional tax obligation to South Africa. Extra so for individuals who left the nation with out settling their tax debt, even when they’ve been gone for many years.”
READ: Expat tax: What to find out about double taxation, your tax standing and SARS penalties
Adjustments to the expatriate tax legal guidelines got here into impact on 1 March 2020, quickly after SARS launched its devoted Overseas Employment Unit, which is targeted on South Africans working overseas.
Moreover, it was introduced that the present monetary emigration regulation, which up to now had been profitable in confirming one’s non-resident standing with SARS and the SA Income Service (SARB), could be amended.
“The change will inherently make it tougher to stop tax residency and with a brand new and, as but, undisclosed alternative course of on the horizon, there was an enormous inflow of functions to beat the [1 March 2021] deadline,” says Leon.
Moreover, the time period “wilfully” was faraway from the Tax Administration Act in relation to coping with non-compliance. This offers SARS higher leverage to prosecute anybody claiming negligence when failing to satisfy their tax obligations.
“That is according to the reasoning for the change within the expatriate tax laws beforehand, the place the rife tax non-compliance of South Africans overseas was famous throughout Parliamentary classes in August 2017,” says Leon.
SARS assault technique
SARS has begun a two-pronged assault technique, in response to Leon. Firstly, the tax company calls audits on particular person expatriates, wanting them to show they’re non-residents and justify their intentions. Some audits name for proof that the taxpayer had obtained an Emigration Tax Clearance Certificates when leaving South Africa.
Secondly, SARS calls audits on offshore earnings revealed by means of the widespread reporting commonplace (CRS). In line with Leon, this comes as no shock, as SARS is concentrating on those that have traditionally been in a position to “conceal” property and funds. This “hiding” of funds will not be doable because of the trade of knowledge between jurisdictions.
Leon says South African expatriates and people wishing to to migrate nonetheless have a number of choices obtainable to them.
For one, they will urgently apply for monetary emigration till March 2021 as Nationwide Treasury confirmed that functions submitted previous to that date shall be processed beneath present laws.
They’ll additionally make the most of any double tax settlement between their chosen nation and South Africa. The tax implications of such agreements fluctuate between jurisdictions and these agreements don’t apply mechanically to the taxpayer.
If an expatriate isn’t tax compliant, she or he can method SARS beneath the Voluntary Disclosure Programme to pay their again taxes together with curiosity and penalties however with out prosecution. Particular necessities should be met.
“SARS has the benefit now, so ready to see what occurs is a plan of action I don’t suggest,” cautions Leon.
* Compiled by Carin Smith