SA GOES FOR EXPATS’ TAX
…SARS' ability to track down elusive SA expatriates to be enhanced from March
JOHANNESBURG- The time for hiding their heads in the sand about tax is over for South African expatriates, says Jonty Leon, legal manager at Tax Consulting SA.
South Africans living or working abroad can no longer "avoid" the long arm of the SA Revenue Service. Stricter legislation to back its efforts to collect taxes and an emerging system of global financial data sharing increases SARS' ability to detect taxpayers who historically "flew under its radar."
"Under pressure to meet its revenue quotas, SARS 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," says Leon.
"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 March 1, 2021."
He advises South Africans 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 who have already left permanently, should ensure they have done so in a compliant manner, and have had themselves noted as non-resident for tax purposes.
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.
"Tax residency of South Africa is not determined solely on the amount of time spent in the country. This is a far more complex issue which must be technically dealt with in terms of the law," explains Leon.
"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."
Changes to the expatriate tax laws came into effect on March 1, 2020, soon after SARS launched its dedicated Foreign Employment Unit, which is focused on South Africans working abroad.
SARS has begun a two- pronged attack strategy, according to Leon. Firstly, the tax agency calls audits on individual expatriates, wanting them to prove they are non-residents and justify their intentions.
Some audits call for proof that the taxpayer had obtained an Emigration Tax Clearance Certificate when leaving South Africa.
Secondly, SARS calls audits on offshore income revealed through the common reporting standard. According to Leon, this comes as no surprise, as SARS is targeting those who have historically been able to "hide" assets and funds. This "hiding" of funds will no longer be possible due to the exchange of information between jurisdictions. – FIN24.