 Authored by: Thomas Lobban, Jean Du Toit & Jonty Leon from Tax Consulting SA
This week, on 26 November 2019, the National Assembly passed the latest tax bills, which is set to be promulgated by the President after it has been passed by the National Council of Provinces. On the face of it, some concessions have been made for individual taxpayers, but these offer cold comfort in the bigger scheme. Proposed Amendments Before we get to the truly profound implications, it is important to note the following amendments:
Tax Man Always Searching for His Pound of Flesh At first glance, it appears that there are no profound amendments to the Income Tax Act or the Tax Administration Act that would raid the pockets of taxpayers, to generate additional revenue. This is peculiar, since the prevailing budget deficit is a massive elephant in a room with grim economic prospects and a junk credit rating. However, taxpayers must not be fooled. In the current economic climate and with SARS so far behind on collection, it is unlikely that the 2019 legislative cycle would not have been put to good use the drum up some more money. Government is smart enough to understand that big changes cause controversy, as we have seen with the VAT rate increase or the amendment to the exemption on foreign employment income. With no such amendments, were taxpayers truly given a tax break in light of the current economic landscape? No Change Means More Revenue In truth, the biggest change by far is not a change at all, nor is it actually found in the Income Tax Act or Tax Administration Act. The Rates and Monetary Amounts and Amendment of Revenue Laws Act, 2019 proposes no amendment to the tax brackets which prescribe the rates of tax applicable to individual taxpayers. In a country with a relatively high inflation rate, this is a problem, since the salaries of employees generally increase in line with inflation. Where the tax brackets do not increase correspondingly, this results in so-called “bracket creep”. In real terms, while this means that individuals are technically earning more, they are actually taking home less pay each month as compared to the previous year. In fact, in many cases taxpayers may be pushed into a higher tax bracket. The upshot is the taxpayer’s pay increase is wiped out by additional taxes. It should also be mentioned that this is the second year in a row that the tax brackets have not been increased, which means that taxpayers will need to further reduce their cost of living for another year, in order to make ends meet. While this will not necessarily affect lower income earners, it will certainly have a significant impact on the already overburdened taxpayers in the middle- and higher-income brackets. This also affects those who will be withdrawing lump sum benefits from their pension interest. In this case, the special tax rates applicable to these amounts also remain unchanged. This means that these persons will be forced to enter into retirement with less cash available to defray their cost of living – an unfortunate consequence of bracket creep. Say Good-Bye to South Africa’s High Earners The long-term effect of these changes (or lack thereof) can only realistically be determined over time. This is an effective measure to generate revenue over the short term, but the question must be asked; how much financial constraint taxpayers are willing take before it becomes unsustainable and individuals simply decide to leave South Africa? We have already seen a massive jump in South Africans deciding to leave the tax net by formally noting their non-resident status by financially emigrating from South Africa. As it stands, National Treasury is already relying heavily on the higher earning segment of the individual tax base and measures like these forces the hand of taxpayers who are already contemplating their departure. Ultimately, we lose important taxpayers and their descendants to the tax base permanently, which leads to less revenue for government. Cunning as it may be, it would seem that government’s band aid is a temporary fix that will exacerbate a far larger problem. ENDS MEDIA CONTACT: Rosa-Mari Le Roux, 060 995 6277, rosa-mari@thatpoint.co.za, www.atthatpoint.co.za ABOUT Tax Consulting SA: Tax Consulting SA offers a streamlined service in the calculation and filing of individual income tax returns, provisional income tax returns or any other more complex individual tax relate matters. Our highly qualified team of Tax practitioners are registered with SARS under controlling body of the South African Institute of Tax Practitioners (SAIT). As tax specialists, we remove the burden from clients to keep their tax affairs in good order, achieving optimal tax savings while ensuring full compliance. For more information on Tax Consulting please visit: Website: http://www.taxconsulting.co.za/ LinkedIn: Tax Consulting South Africa Facebook: Tax Consulting South Africa
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 Written by: Jonty Leon, Financial Emigration Legal Manager
SARS Views – Not a Law Unto Itself It is an unfortunate sight when tax advisors from varied backgrounds, but more so those who do not have a legal background, turn a blind eye to South African tax legislation and rather submit to the ever-dominating “views” of SARS. Arguing with such an advisor who uses “SARS said…” or “SARS’ interpretation note…” is like screaming into a black hole. Unlike for practicing attorneys, who are officers of the Court and must serve the Court to come to the correct decision; the tax practitioner plays a different role. SARS’ views are unavoidably one-sided, and the ethically correct space for a tax practitioner to operate is to provide balance to the equation, whilst always ensuring full compliance. Legally Blind Tax Advisors When a tax advisor only makes use of the views, or releases of SARS to determine what is best in one’s situation, which occurs more often than we like to believe; it generally ends with the taxpayer inadvertently and unnecessarily compromising their position, in favour of SARS. A true tax advisor must read the law. If this is not the starting point of their advice, there is already a problem and the advisor sets the client on a trajectory of paying too much tax or selling a tax service which is not really needed. With the correct interpretation of the law, the tax advisor has a chance. Without it, SARS reigns supreme, swinging its sceptre in favour of its own agenda. The issue with a tax advisor taking the words of SARS as gospel, is that SARS is a litigating party to any dispute with a taxpayer. It is therefore inconceivable that SARS’ views on legislation, “must be correct”. SARS has one job, to collect as much revenue from the taxpayer as possible, and not to provide ways for the taxpayer to reduce their liability. For some reason, tax advisors seem to forget this and play straight into the field of SARS’ collection priorities. The Full Might of the Letter of the Law Our Constitutional Court has clearly stated that SARS’ view cannot be relied upon, and specifically refers to SARS’ Interpretation Notes. In the ConCourt case Marshall and Others v Commission for the South Africa Revenue Service, the Court stated: “Why should a unilateral practice of one part of the executive arm of government play a role in the determination of the reasonable meaning to be given to a statutory provision?...In those circumstances it is difficult to see what advantage evidence of the unilateral practice will have for the objective and independent interpretation by the courts of the meaning of legislation, in accordance with constitutionally compliant precepts. It is best avoided.’ This Judgment is damning against SARS, and goes on to state, “Deference to an administrative body’s own interpretation of the meaning of a statute which it is responsible for implementing should be avoided, particularly when the administrative body is party to the litigation.” The Legally Literate Tax Advisor With the law in hand, a tax advisor that has been to Tax Court is an invaluable weapon. Having stood toe-to-toe with SARS on many occasions, and having insight into their strengths and weaknesses but more importantly understanding the legal obligations to win a case, becomes the only reliable stronghold to a daunting fight against the great collector, SARS. In terms of section 102 of the Tax Administration Act No. 28 of 2011, the onus of proving, “that an amount, transaction, event or item is exempt or otherwise not taxable”, falls on the taxpayer. Thus, the taxpayer bears the onus of proving that they are “innocent” on a balance of probabilities. Our Court’s in a decision by the Special Court in ITC 43, held that, “in the case of all things being equal we are bound to decide in favour of the Commissioner.” This means that the starting point for any tax planning or compliance advice, including SARS disputes, should be whether the taxpayer has passed the burden of evidential proof. The Law will Seal the Deal It is so important to have a legally literate tax advisor with tax court experience, who is capable and willing to use all available legal weaponry in their arsenal to advance your case. More importantly to ensure that the advice given to you prior to you even needing to step foot in a Court, is holistic and grounded in law, not on SARS’ opportunistic interpretation of the law. The next time you get an audit finding or your tax advisor hammers on “SARS will say this” and “SARS will say that”, be mindful of what the Constitutional Court has said about the views of SARS, that they ‘best be avoided’. A Tax Advisor is there to serve the taxpayer’s interests, not the interests of SARS. ENDS MEDIA CONTACT: Rosa-Mari Le Roux, 060 995 6277, rosa-mari@thatpoint.co.za, www.atthatpoint.co.za ABOUT Tax Consulting SA: Tax Consulting SA offers a streamlined service in the calculation and filing of individual income tax returns, provisional income tax returns or any other more complex individual tax relate matters. Our highly qualified team of Tax practitioners are registered with SARS under controlling body of the South African Institute of Tax Practitioners (SAIT). As tax specialists, we remove the burden from clients to keep their tax affairs in good order, achieving optimal tax savings while ensuring full compliance. For more information on Tax Consulting please visit: Website: http://www.taxconsulting.co.za/ LinkedIn: Tax Consulting South Africa Facebook:Tax Consulting South Africa  The impact of the future tax treatment of income earned by South Africans while they are living and working abroad has been widely publicised.
It has also contributed to the first publication of its kind that deals with the tax considerations of South Africans abroad or those with international interests, and foreigners working and living in SA. LexisNexis’ new publication titled, Expatriate Tax : South African Citizens Working Abroad and Foreigners in South Africa, is authored by the independent specialist tax practice Tax Consulting South Africa and explores the fiscal legislation and the approach to tax law from a practical perspective. In his foreword Judge Dennis M Davis, Chairman of the Davis Tax Committee and Judge President of the Competition Appeal Court, says expatriate tax planning and compliance necessitates an understanding of South African tax law, but also of international tax law, and that the publication provides a clear understanding of the tax consequences of migration. Tax Consulting is of the view that when there is any discussion around expatriate tax, one cannot have it without also having the discussion around work visas, residency permits, and citizenship considerations.The book devotes a whole chapter on these issues. Co-author and lead, tax technical at Tax Consulting Jean du Toit says it is quite apt for their firm to have written the book at this time. The way that expat tax is going to be dealt with is set to change on 1 March 2020. The current foreign income exemption will from then on be capped at R1million and calls for proper tax planning going forward. The textbook is written not only for technocrats, but also for officials of the South African Revenue Service, employers, human resources specialists and even for laymen who wish to understand their tax obligations. “The book is quite technical but it is balanced with practical examples and explanations about the SA tax system. It gives a lot of context to some of the provisions in the legislation and why it was enacted.” Du Toit says the book follows a logical flow as it starts with an overview of the South African tax system and how certain sections and provisions have to be interpreted. It also covers specific areas that goes hand in hand with emigration and immigration namely work visas, remuneration strategies, exchange control and how it will affect your tax obligations. “It gives clear guidance on what to do when people are planning to leave the country, if they have already left and if they are coming back. It is important for any taxpayer to understand their tax obligations as they are ultimately responsible for their own affairs despite having a professional assisting them.” Marisa Jacobs, director of Xpatweb, says there has been a lot of talk in the market and at the launch of the book, hosted by the British Chamber of Business in Southern Africa, of long processing times and inconsistencies in terms of the requirements for visa processes when dealing with expatriates. However, they follow a proactive approach and are not experiencing these heavy delays. “Where an immigration provider is prepared and engages correctly (with the Department of Home Affairs and the various embassies) the delays are not so common.” She says they have included work visas and residency permits in the book because when having a discussion around (expat) tax, you cannot have it without also having a discussion around visas and permits. “The wrong decision on a work visa category can have a devastating financial impact for a company or an individual where you trigger tax and exchange control residency too soon.” The critical skills list, which has been hotly debated after a draft list was leaked, is expected to be published by April next year. Xpatweb runs the annual critical skills survey (which will close on 27 November) and the results will be submitted to the department before the list is finalised. Jacobs acknowledged the work that has been done by the department to reduce turnaround times and says there is “significant show” that they are improving their efficiency. ENDS MEDIA CONTACT: Rosa-Mari Le Roux, 060 995 6277, rosa-mari@thatpoint.co.za, www.atthatpoint.co.za For more information on Tax Consulting please visit: Website: http://www.taxconsulting.co.za/ LinkedIn: Tax Consulting South Africa Facebook:Tax Consulting South Africa  The role of job evaluation, also referred to as Job grading is still poorly understood in the corporate sector.
Job evaluation give companies the information they need to fairly, accurately and competitively determine the salaries of staff - amongst many other functions, says Janine O’Riley, Psychometrist & Reward Specialist at Remuneration Consultants. “Job evaluation is the internal currency that a business use to determine how they remunerate staff. All employers must implement very specific measures to achieve equal pay for equal work, according to section 6(4) of the Equity Act. Non-compliant employers are at risk of being liable for prosecution at the CCMA should they not be able to provide sufficient proof of compliance or have a plan in place to correct any inequalities. Companies are also legally required to have documentation of pay comparisons and explanations of pay differentials within their company,” says O’Riley. Benefits of job evaluation O’Riley says that job evaluation is crucial for internal and external parity and inform companies with everything from recruiting to remuneration. Job evaluation also assists with organisational design. This helps companies determine which jobs are needed and map out where these jobs will fit into their organizational chart. “Logistics surrounding recruiting needs and reporting are easy to plan and plot when employees’ jobs are evaluated. This information also enables companies to be proactive about succession planning and the career development of their staff,” says O’Riley. When the jobs are evaluated, internal parity can be ensured by streamlining the various departments and business units for jobs on a similar level with similar grades. Once internal jobs have been evaluated, survey/market data (benchmarking data) can be obtained from a provider to compare internal salaries with the rest of the market, enabling a company to benchmark salaries in the industry, ensuring external parity. Benchmarking your employee salaries will inform employers whether individuals are underpaid, overpaid or paid according to market salaries. This in turn will inform employers how to go about their talent management and focus on top talent - how they are remunerated and planning on how to retain this key talent. “Any successful business must have competitive PayScale’s that is comparable with the local labour market and fair to all employees,” says O’Riley. Your job evaluation and benchmarking data will serve as initial inputs for development of the company PayScale’s and year on year updating thereof. Job evaluation methodologies Various job evaluation methodologies can be used. Some providers have their own inhouse job evaluation methodologies that can be purchased from them. Remuneration Consultants uses the Paterson evaluation methodology, which is easy for everyone involved in the job evaluation process to understand, non-discriminatory and public information – so in essence a more cost-effective option. There are two ways to do job evaluation with the Paterson methodology. One is a desktop-based evaluation session that uses the job profile and other informative company documentation as input to the job evaluation. It is crucial the job profile is a 100% reflection of the job and its duties as this will be the only input to the evaluation session. It goes without saying that this is a more cost and time effective option, but often companies are not comfortable using documentation as the only input to the process. The second option is an interactive process that includes interview sessions with relevant stakeholders such as line managers, HR managers and a union representative, in certain cases, as well as any informative company documentation such as organisational charts and job profiles. By using this option, the relevant information can be extracted out of the session ensuring the jobs are evaluated accurately. This is however a more time and cost heavy option but guaranteed to yield accurate results. “Both job evaluation options can give a business the insights they need to make smarter, more strategic decisions and comply with the Department of Labour’s requirements, concludes O’Riley. ENDS MEDIA CONTACT: Rosa-Mari Le Roux, 060 995 6277, rosa-mari@thatpoint.co.za, www.atthatpoint.co.za ABOUT Remuneration Consultants: Remuneration Consultants South Africa provides market leading remuneration and employee benefit consulting services. Our competitive advantage is adding a layer of tax optimization to the solutions we deliver. This enables us to optimally structure your Total Rewards System from the ground up to be fully compliant, where tax is planned proactively and not a mere afterthought. Our team consists of full-time tax attorneys, tax professionals, reward specialists, global remuneration professionals (GRP), chartered accountants, professional accountants and psychometrists. For more information on Remuneration Consultants please visit: Website: www.remunerationconsultants.co.za LinkedIn: Remuneration Consultants Facebook: Remuneration Consultants  Recent media reports have criticized South Africa’s restrictive visa rules and the Department of Home Affairs’ poor handling of visa applications.They claim these shortcomings discourage investors from entering the country, thereby inhibiting economic development and job creation.
However, according to Moeketsi Seboko, Immigration Manager at Xpatweb, those accounts are overdramatized and outdated. “In the wake of the Department’s 2017 White Paper on International Migration for South Africa, we have been seeing good progress towards a simpler yet secure visa application and fulfilment system,” he says. Improvements Already, a number of notable improvements to South Africa’s visa regime are being launched, as announced recently by Home Affairs Minister Aaron Motsoaledi. These are aimed at making the country more accessible to visitors, investors, and people with critical skills that are vital to building the economy. For critical skills, the Department has lowered visa turnaround times to under four weeks in 88.5% of applications. Business and general work visas are now issued within eight weeks for 98% of applications. Visas for visitors from Qatar, Saudi Arabia, UAE and New Zealand were waived last month. Now, visa requirements for countries such as China and India, which are major sources for tourism to South Africa, have also been simplified. Further, Home Affairs has located visa services at various investment agencies around the country to provide easier access to visa applicants and holders. Best of all, the Department will embark on a pilot project for its new e-visa system in November, which allows applications to be made online, instead of requestors having to visit a South African mission in their home country. Security the first priority Although the nation has an open border policy, protecting the safety and security of South African citizens comes first, and this is the core concern when developing entrance requirements or systems. The Immigration Act is clear in its preamble that visas and permanent residence permits (PRP) are issued as expeditiously as possible. This is done on the basis of a simplified procedure and objective, predictable and reasonable requirements and criteria, and without consuming excessive administrative capacity. Security considerations must be fully satisfied and the state must retain control over immigration of visitors to the Republic. Prescribed requirements and due process need to be adhered to, and foreigner nationals have a duty to improve and benefit the economy of the country and to not disadvantage South Africans seeking employment. “Globally, there is no immigration policy that gives investors an automatic right to a visa,” says Seboko. Assisting Home Affairs It is the responsibility of every immigration practitioner to ensure their services are geared towards supporting government policies, especially the promotion of economic growth. They should assist corporates and executives to bring foreign nationals with needed expertise into the country, provided they align with the critical skills list and conform to various work visa requirements. Xpatweb is currently running their 2019 critical skills survey among its clients and other corporates, the results of which will be shared with the Department for consideration, and which has been widely quoted and used by other Government departments for informed decision making on market perception. In conclusion, Seboko says: “It has been our experience that the Department is receptive to engagements and inputs from role players in the industry. Like any other government department, red tape and bottlenecks are frustrating but with patience and persistence, positive outcomes are always achieved.” ENDS MEDIA CONTACT: Rosa-Mari Le Roux, 060 995 6277, rosa-mari@thatpoint.co.za, www.atthatpoint.co.za ABOUT Xpatweb: HOLISTIC EXPATRIATE SOLUTIONS The Xpatweb group has been in existence for over 14 years and includes 90+ professionals, including immigration specialists, mobility practitioners, tax practitioners, attorneys, and chartered accountants. They offer holistic, client-centric, and fully compliant expatriate and work visa solutions. Clients can expect an exceptional end-to-end service that starts with an initial technical meeting to discuss any past challenges, a recommended optimal solution, and the creation of a roadmap and protocol for service delivery. They also offer an on-premises immigration audit service to confirm expatriate employees hold legally obtained, valid visas, and that their duties align with their visa conditions. In addition, their unique online immigration tracking system helps you to easily manage and track expatriate assignees across the globe, is fully customisable and dashboard-driven, and provides a secure repository for storing assignees’ documents. For more information on Xpatweb please visit: Website: http://www.xpatweb.com/ LinkedIn: https://www.linkedin.com/company/work-permit-south-africa/ Facebook:https://www.facebook.com/xpatweb/  Authored by: Jean du Toit and Jonty Leon, Technical Editors of the 2019 LexisNexis & Tax Consulting publication “Expatriate Tax - South African Citizens Working Abroad and Foreigners in South Africa”
There are extremely good reasons for South African expatriates and their employers to be deeply confused and uncertain on “the expat tax”.There are simply too many differentiating views in the market, often punted from a conflicted business perspective. What aggravates this the vast number of professionals, and even expatriates themselves, who believe that tax law can be explained by a simple post on social media. Making an informed decision requires an understanding of tax law, principles of legal interpretation and is complex process, straddling both South African and international tax law. With a view to bringing tax law interpretation back to the fundamentals, LexisNexis has identified the need for a technical, yet practical publication. The publication launches in October 2019 and is titled, “Expatriate Tax - South African Citizens Working Abroad and Foreigners in South Africa”. Judge DM Davis, considered by many as the most esteemed tax judge on the bench and Chairman of the Davis Tax Committee notes in his foreword that this is “a most welcome addition to our body of tax literature and will doubtless be essential reading for anyone advising his or her client with regard to the tax consequences of migration.” No longer a question of if or when As many South African expats are now aware, as of 1 March 2020, the amendment to section 10(1)(o)(ii) of the Income Tax Act No.58 of 1962 (“the expat exemption”) will bring considerable change the expat landscape. With less than 6 months to go, expats are scrambling to understand the implication thereof, some still with their head in the sand, hoping this will not come to be, or worse, that they can hide from it. For those still in disbelief, the amendment to the expat exemption was promulgated in section 16(1)(g) of the Taxation Laws Amendment Act No. 17 of 2017, on 18 December 2017 under gazette number GG 41342. It is law. Background - Expats versus SARS In the 2017 Taxation Laws Amendment Bill, it was announced by National Treasury that the expat exemption would be repealed in its entirety – meaning that the totality of an expat’s income earned abroad would be subject to tax in South Africa. This perturbed the expat community, their employers and other stakeholders. Following presentations to the Parliamentary Standing Committee on Finance and many submissions and workshops later, expats were begrudgingly handed the R1 million per annum exemption, and an extension to the effective date of the amendment, being March 2020. In March 2019, National Treasury held a workshop to further discuss the expat exemption, and in no uncertain terms, confirmed that the law would forge ahead in its current form. This was confirmed when the Draft Taxation Laws Amendment Bill was released, which did not contain any further proposed amendments to the expat exemption. Benefits and Allowances Most still misunderstand just how the expat exemption will work, and what will be taxable. It must be understood that expats’ entire remuneration will be taken into account. What this means is that if they remain tax resident, they will be taxed fully on any allowances and benefits, as if they were just a normal employee working in South Africa. The consequence for the expat is likely that the R1 million exemption will be, in some case, exhausted somewhat rapidly. This will especially be the case where their employer pays for “benefits” such as security costs or drivers, international school fees, medical insurance or housing, even though these may not provide any economic benefit to the expat. Unforeseen Dire Impact on SA Economy A very real impact is that an expat, to perform their same duties, will not do so with less take home pay as a result of the amendment. This will in some cases mean that any added tax burden on the expat will be expected to be borne by the employer if they want to attract and retain scarce resources. This may also simply be the case as a result of standing policies such as tax protection or tax equalisation. More worrying is that these employers can often not afford to increase a package in this manner, which will lead to those employers setting their gaze on resources from jurisdictions with less punitive tax regimes. We can potentially expect to see South African expats become less and less desirable in the global market, if this is the case. For those of us back home, we may need to consider what the expats would do if their employer would not step in to alleviate the extra burden. These expats may simply decide to sever their ties with South Africa and cease their tax residency. In the long term, these individuals represent an important segment of our tax base and with their departure the struggling fiscus would have to look at those who remain to make up the shortfall. Uncertainty for employers In addition to possibly having no choice but to pay their employees more, employers of expats are unsure how the amendment should be administered from a payroll perspective. Employers have to ensure they withhold PAYE correctly, which is likely to be tricky if they do not want to prejudice the employee by being too conservative. When presented with a surge of questions around payroll administration during the last workshop, SARS indicated that a dedicated function would be established to deal with queries around the amendment specifically. SARS has also issued a Q&A document to provide clarity on certain items, but many questions remain unanswered ENDS MEDIA CONTACT: Rosa-Mari Le Roux , 060 995 6277, rosa-mari@thatpoint.co.za, www.atthatpoint.co.za For more information on Tax Consulting please visit: Website: http://www.taxconsulting.co.za/ LinkedIn: Tax Consulting South Africa Facebook: Tax Consulting South Africa  The time for making a decision on how to deal with the fundamental tax change for South Africans earning foreign income abroad is fast running out.
The change to section 10(1)(o)(ii) - the foreign income exemption – will become effective in about six months’ time. South African tax residents will then be taxed on all their foreign income exceeding R1m. Many South Africans are still unsure what to do, how it will affect them and how the South African Revenue Service (SARS) will administer this change, says Jonty Leon, expatriate tax legal manager at Tax Consulting SA. Employers have also contemplated the impact of the law change on them, with the realisation that they will likely have to bear the additional tax cost that would be imposed on South African expatriates. This could have dire consequences for South Africans as a more cost-effective solution may be to repatriate South African employees and to replace them with an expatriate from a less punitive tax jurisdiction. Since the change was introduced there has been a lot of uncertainty, and even misunderstandings in the market about the impact on South Africans working and living abroad. SARS issued a “Frequently Asked Questions” document this week seeking to assist with clarity and consistency. The document expressly states that it may not be used as a legal reference and expressly asks to solicit more questions regarding the amendment. SARS has also setup a dedicated email address ForeignEmployment@SARS.co.za , so this amendment and South Africans abroad are now given dedicated attention and with a focused team. Leon says some of the confusion is caused by the fact that all South Africans living abroad are painted with the same brush and are simply labelled “expatriates”. He says there are basically three categories – those who have emigrated permanently, those who have not emigrated but who are tax resident in another country and those who are remain tax resident in South Africa. He says tax residents will be hit by the law change. Tax Consulting has witnessed certain advisors, mostly those hidden behind the anonymity of offshore tax havens, punting aggressive tax solutions to this vulnerable group. “The most effective way for the change in legislation to legally have no effect on a taxpayer, is to become non-resident for tax purposes. Being non-resident would mean that the expat exemption does not apply to the taxpayer. Unfortunately, becoming non-resident is not an easy process.” He points out that the burden of proving non-residency is on the taxpayer; and this burden is weighed on a balance of probabilities. According to SARS, financial emigration is not connected to an individual’s tax residence. Leon notes this statement must be understood in context of SARS also confirming now expressly that ‘financial emigration’ is a factor to be taken into account by SARS when determining tax residency. The process of financial emigration is not merely a SARB process, as it must include an important SARS component, being that one must obtain an Emigration Tax Clearance certificate, issued by SARS. An important question answered by SARS is “Must I notify SARS if I cease to be tax resident in South Africa” and “How much I notify SARS if my tax residency status changes”. The simple answers hereto are that SARS must be notified. This can be done on the tax return and also “SARS can be notified when an application is made for a tax clearance certificate via eFiling when emigrating from South Africa”. Leon explains that this Emigration Tax Clearance Certificate is a critical part of the financial emigration process, in order to notify SARS of your non-residency and SARB of your emigrant status. Leon warns that taxpayers should err on the side of caution when it comes to SARS notices and views on taxpayer status, including that there is a considerable difference between administrative compliance versus being prepared for a SARS audit and defending your non-residency where you get audited. When you get audited by SARS on your tax residency status, SARS does not have to prove anything. The taxpayer carries this burden. “Frankly, if you have not financially emigrated we foresee an uphill battle to discharge your onus of proof that you are no longer ‘ordinarily resident’ ”, Leon remarks. “This does not mean we agree that simply doing financial emigration will automatically make you non-resident . . . Where you have not followed the correct process and, importantly, cannot evidence this in court, your financial emigration process is worthless,” he warns. The clarification issued by SARS is also invaluable as it does not recognize the term used in certain social media circles of “tax emigration” or “tax migration”. Leon remarks there is no authority for this term and this appears to be more aimed at claiming double tax relief, which obviously remains a separate process than the more permanent solution of breaking your ‘ordinarily residency’ status with SARS. ENDS MEDIA CONTACT: Rosa-Mari Le Roux, 060 995 6277, rosa-mari@thatpoint.co.za, www.atthatpoint.co.za For more information on Tax Consulting please visit: Website: http://www.taxconsulting.co.za/ LinkedIn: Tax Consulting South Africa Facebook:Tax Consulting South Africa  Authored by: Marisa Jacobs, Director at Xpatweb
With the pending tax changes in South Africa, due to be enforced from 1st March 2020, the EU second passport scheme is an attractive and enticing proposal for South Africans. The turbulent future of South Africa is driving record numbers of South African in applying for second EU passports. The enticement of a second European passport through Investment has seen Cyprus, Greece, Malta and Portugal experiencing vast an increase of applicants from South Africans. Since 2018, there has been an increase of 364% in interest from South Africans for a second passport. What many South Africans call “Plan B” continues to gain popularity. With a European passport, the prospect of living in any country forming part of the European Union is highly attractive. South Africans are looking to their future and that of their children, the idea of having the opportunity to study and work in any country across the EU remains appetising. Ease of travel is also a key reason, with the South African passport allowing access to 102 countries however excluding the world biggest economies such as the US, UK, Europe Schengen area and Canada. A Cyprus passport allows visa free travel to 169 countries, Greece 183 countries, Malta 182 countries and Portugal allows visa free travel to 184 countries. Thus, travel, education, employment, business opportunities and safeguarding a better future for their family are key reasons for record numbers of South Africans in the past 12 months applying for second EU passports. Depending on the EU Scheme, these EU passports can be ascertained through investments starting from €250,000 and take between 6 months – 7 years to attain the EU passport (no residency period in the country required). Therefore, a South African does not have to permanently live in the country to attain the EU Passport. Vast numbers of South Africans are looking to the future and are open to making the investment for both themselves and their children’s future. ENDS MEDIA CONTACT: Rosa-Mari Le Roux, 060 995 6277, rosa-mari@thatpoint.co.za, www.atthatpoint.co.za ABOUT Xpatweb: HOLISTIC EXPATRIATE SOLUTIONS The Xpatweb group has been in existence for over 14 years and includes over 70 professionals, including immigration specialists, mobility practitioners, tax practitioners, attorneys, and chartered accountants. They offer holistic, client-centric, and fully compliant expatriate and work visa solutions. Clients can expect an exceptional end-to-end service that starts with an initial technical meeting to discuss any past challenges, a recommended optimal solution, and the creation of a roadmap and protocol for service delivery. They also offer an on-premises immigration audit service to confirm expatriate employees hold legally obtained, valid visas, and that their duties align with their visa conditions. In addition, their unique online immigration tracking system helps you to easily manage and track expatriate assignees across the globe, is fully customisable and dashboard-driven, and provides a secure repository for storing assignees’ documents. For more information on Xpatweb please visit: Website: http://www.xpatweb.com/ LinkedIn: https://www.linkedin.com/company/work-permit-south-africa/ Facebook:https://www.facebook.com/xpatweb/  Authored by: Marisa Jacobs, Director at Xpatweb
The demand for critically skilled foreigners has significantly increased considering its integral role within the economic growth within South Africa The Department of Home Affairs’ (DHA) Director of the Corporate Accounts Unit, Mr Phindiwe Mbhele, has provided some much-needed insight to HR professionals in terms of the Critical Skills Visas and its requirements at the recent SARA International Mobility event in September 2019. Critical skills visa journey The first list identifying the scarcity of critical skills in South Africa, first published in 2006 and revised in 2009 and 2014, has become an ever-evolving element in recruiting skilled foreign nationals within the country. From 2006 and prior to the publication of the current Critical Skills List, the ‘Quota Work Permit’ (since replaced by the now Critical Skills Work Visa), required consultation with the Ministry of Labour and Ministry of Trade and Industry in order to support the issuance of such a permit to a foreign national, and to determine the number of work permits that may be issued. It is evident that the DHA throughout the years has continuously strived to simplify and improve the visa application process to allow employers to attract skills. An example hereof is the uncapped number of work visas available within the Critical Skills List, this is however subject to constant monitoring to ensure that there is not a undesired influx of skills in the country. Critical skills vs scarce skills Many may identify Critical Skills and Scarce Skills as the same thing, however Mr Mbhele clearly differentiated the two terms. The definition of “Critical Skills” are those that are regarded as critical for the improvement of economic growth, and without such skills, projects that serve to improve the economy, cannot be undertaken. Naturally, it also refers to high-level skills that are not easily sought within the country. There is availability of certain levels of skills as prescribed in the Critical Skills list, however, the intention is to expand the “skill pool(s)” in order to accelerate further growth within the South African economy. Conversely, Scarce Skills are identified as those that are unavailable in the country, however, are not always necessarily deemed to be in high in demand. Temporary residence vs permanent residence as a critical skills holder Mr Mbhele further provided a clear distinction between Temporary and Permanent residency in terms of those whom are Critically Skilled. In order to qualify for a Critical Skills Visa, a person must possess a certain level of skills and qualifications and must be able to demonstrate such skills in line with the prescribed critical skills category. Where employment is yet to be secured, this visa shall be issued for a period of twelve months to enable the person to seek and secure the appropriate employment within the country. However where there has already been employment secured, the visa may be issued for a period of up to five (5) years, albeit subject to passport validity and the duration of employment. One of the upsides of obtaining a Critical Skills Visa is that the person immediately qualifies for Permanent Residency, however such a permit may only be issued once a permanent offer of employment is available to the applicant. A Permanent Residency application is further reviewed and processed based on the person’s professional category and/or occupational class. Does the OIHD list support the critical skills list? Regrettably, no. Mr Mbhele has clarified the Occupations in High Demand (OIHD) list and its impact on the Critical Skills sector. Accordingly, the OIHD list may not be associated with Critical Skills list as the OIHD list cannot be utilised for South African Immigration purposes. The OIHD list serves to South Africans and the improvement of the Post School Education and Training System (PSET) and to identify the occupations that have been classified as high in demand and/or conversely, occupations that are experiencing scarce skills, but may expect an influx of demand in the future. Why we need your input Some occupations identified as Critical, may however be removed from the Critical Skills list due to the limited number of positions available within the country filled, not only by foreigners, but by South Africans. This was made evident by the Department of Health’s recently issued notice indicating the suspension of the recruitment of foreign doctors. Mr Mbhele advised that the new Critical Skills draft list is due to be published by April 2020. As South African employers, it is our duty to provide input to the DHA in terms of those skills that are deemed critical across the respective sectors to ensure we continue to be able to attract the skills that contribute to the growth of our economy. Xpatweb’s 2019 Critical Skills Survey allows South African employers to provide their feedback and input toward the economic growth. Participate in Xpatweb’s 2019 Critical Skills survey, here. ENDS MEDIA CONTACT: Rosa-Mari Le Roux, 060 995 6277, rosa-mari@thatpoint.co.za, www.atthatpoint.co.za ABOUT Xpatweb: HOLISTIC EXPATRIATE SOLUTIONS The Xpatweb group has been in existence for over 14 years and includes over 70 professionals, including immigration specialists, mobility practitioners, tax practitioners, attorneys, and chartered accountants. They offer holistic, client-centric, and fully compliant expatriate and work visa solutions. Clients can expect an exceptional end-to-end service that starts with an initial technical meeting to discuss any past challenges, a recommended optimal solution, and the creation of a roadmap and protocol for service delivery. They also offer an on-premises immigration audit service to confirm expatriate employees hold legally obtained, valid visas, and that their duties align with their visa conditions. In addition, their unique online immigration tracking system helps you to easily manage and track expatriate assignees across the globe, is fully customisable and dashboard-driven, and provides a secure repository for storing assignees’ documents. For more information on Xpatweb please visit: Website: http://www.xpatweb.com/ LinkedIn: https://www.linkedin.com/company/work-permit-south-africa/ Facebook:https://www.facebook.com/xpatweb/  Written by: Jonty Leon, Legal Manager at Financial Emigration
South African Expat Exemption – Need for Greener Pastures As many know by now, the exemption on foreign income for South African tax residents has been amended, and the amendment comes into effect on 1 March 2020. Due to the harshness of the amendment, many South Africans are looking into obtaining second passports or starting a life elsewhere. The United States (“the US”) has often been an option, for those seeking the so-called “American Dream”. EB-5 Investor Visa The US has run an investor program since 1990 whereby individuals who want to obtain a green card, can invest funds in the US while meeting certain requirements, and if met, would be able to subsequently obtain permanent residency and later, citizenship. The program is here to stay, however, requirements are rapidly becoming more onerous on the individual. These requirements officially change on 21 November 2019. Current State of Play Before the change in regulation takes place, the investor needs to meet the following requirements to be granted an EB-5 visa:
As noted, the regulation around the EB-5 visa is changing from 21 November 2019. All the requirements, except one, from the current regulation remain the same. The difference is that from the effective date of the amendment, the required investment increases from $500 000,00 to $900 000,00 in order to qualify for the program. For those who have been planning on investing in the US to one day obtain citizenship, it is becoming a whole lot more expensive. Advantages of the Investor Program While the obvious advantage of the program is that the investor can obtain permanent residency and later citizenship in the US, the program also provides other incentives, especially where the service provider who assists with the application, is top notch and knows where to invest. Other advantages include:
Taking into consideration the change in regulation, those who intend to settle in the US should consider jumping at the opportunity while it still lasts. With so many fly-by-night organisations punting to provide the service, it is important to perform due diligence and find a reputable provider. Having dealt with South Africans leaving, or considering leaving to the US, means one often needs to understand the options available and find reputable providers in the market for our clients. ENDS MEDIA CONTACT: Rosa-Mari Le Roux, 060 995 6277, rosa-mari@thatpoint.co.za, www.atthatpoint.co.za For more information on Tax Consulting please visit: Website: http://www.taxconsulting.co.za/ LinkedIn: Tax Consulting South Africa Facebook:Tax Consulting South Africa |
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