Budget takes plight of ordinary taxpayers into account, but no compromise on tax collection25/2/2021  In this year’s budget speech, Minister of Finance Tito Mboweni steered a course between providing some relief to beleaguered taxpayers after a challenging year while still trying to stick to the government’s existing fiscal plans, says Thomas Lobban, Legal Manager for Cross-Border Taxation at Tax Consulting South Africa.
“The budget brings relief to individual taxpayers by raising the brackets on personal income tax by 5%, which is above inflation, and proposed tax increases of R40 billion have been scrapped—for the moment at least. At the same time, though, the Minister highlighted a concerted effort to increase SARS’s ability to bring wealthy individuals using complex financial arrangements in concealing assets to book,” he says. “It appears as though the tax authorities are already taking great strides in investigating high-net-worth individuals suspected of non-compliance.” He points out that this approach follows the recommendations of the Davis Tax Committee to strengthen existing methods for obtaining information on and collecting tax from wealthy individuals. The budget makes provision for an extra R3 billion for SARS to expand its technology infrastructure and expand its specialised audit and investigative unit. “This is encouraging for taxpayers who may have felt that SARS was previously concentrating on easy targets or low-hanging fruit,” he argues. Overall, Mr Lobban worries that the budget rests on a somewhat optimistic view of the economy’s potential for growth, with forecasts revised upwards to 3.3% for 2021 and then 1.9% in subsequent years. Growth forecasts have been too optimistic in the past, and if this proves to be the case again, it could undercut the budget. A surprising move was the drop in the corporate tax rate by 1% to 27%, which will definitely be seen as supporting the President’s growth and job-creation agenda. However, says Mr Lobban, this decrease should be treated with circumspection as the Minister also announced that interest deductions and assessed losses would be limited. “The overall impact of these measures needs to be carefully assessed,” he says. As expected, so-called sin taxes on alcohol and tobacco were increased, but the 8% quantum was perhaps higher than most expected. These taxes are frequently seen by finance ministers as soft targets but, says Mr Lobban, the large increase comes on the heels of mammoth losses in both industries during the various lockdowns. “We know from our lockdown experience that consumers are willing to turn to illicit suppliers when they cannot obtain their desired tobacco or alcohol products, and higher prices now might have the unintended consequence of reinforcing that trend—with damaging effects on the fiscus,” he says. “It is to be hoped that SARS’s increased capabilities and funding will be used to bring the illicit trade in alcohol and tobacco into the tax net. “One could argue that the sustained effort to strengthen and expand SARS’s capability to identify even the most sophisticated tax-evasion schemes, and bring defaulters into line, is the biggest story of the day.” 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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 On 18 February, the Department of Home Affairs gazetted an invitation for public comment on the draft Critical Skills List that was compiled in 2020.
“It is crucial that employers who depend on internationally sourced talent provide prompt feedback,” says Marisa Jacobs, Managing Director at Xpatweb, a private firm that contributed data and expertise towards the list’s compilation. “This will ensure they are not denied business-critical skills that are scarce in South Africa.” Interested parties have until 16h00 on 31 March 2021 to submit their comments in writing. So what should organisations be aware of? What’s missing According to Jacobs, several skills that did not make it onto the draft list might be cause for concern. The first is corporate general manager. Multinationals and large corporates who wish to expand into Africa or globally often need C-suite executives with international experience. Inevitably, they recruit this expertise from countries with whom they wish to do business. So its exclusion may prove to be a strategic disadvantage. Foreign language speakers were also missing from the list. South Africa’s thriving call centre industry is just one place where workers who speak their clients’ home language are essential to local companies growing their international business relationships. Certain artisans are not mentioned. Although it may be argued that the country has an abundance of artisans, several highly specialised trades not on the list can only be sourced from outside our borders. Yet, more commonplace technical professions, like fitter and turner, found their way into the draft. “I’m interested to see how local business will respond to these omissions,” says Jacobs. Survey data Jacobs’ comment is related to her company’s own Critical Skills Survey, through which employers indicated that the competencies mentioned above are indeed in high demand. Xpatweb has hosted its independent survey annually for the past five years and was the only private sector firm invited to contribute to the development of the national Critical Skills List. This speaks to the quality of the data collected and the research methodology the company employs. “It was an honour to work with the Department of Higher Education and Training, the Department of Trade and Industry and the Department of Labour in realising the ultimate goal of Xpatweb’s survey, which is to make a meaningful impact on the country’s economic growth,” says Jacobs. Participation Jacobs reports that the DHET has asked Xpatweb to collect a more detailed dataset from future Critical Skills Surveys. So its currently running survey asks more in-depth questions, like the specific role name, required experience and professional qualifications associated with each nominated skill. She also suggests that because the survey has established itself as a trusted source of data and feeds into the national Critical Skills List, it benefits businesses who participate in it. “Our survey gives them early access to the list development process and ensures their needs are considered long before public comment is invited,” she says. The 2021 Xpatweb Critical Skills Survey ends on 1 March and can be accessed through the company’s website. 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 15 years and includes over 100 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/  Africa is a rapidly developing market with massive growth being seen across numerous sectors of business in the last few years. From the perspective of a Multinational Enterprise (“MNE”), breaking into the African market can be seen as one of the most lucrative business opportunities, with returns in a developing market being notably higher than those in existing or saturated markets. With the opportunity to increase revenue tenfold, it’s no wonder that many MNEs wish to expand their footprint across the continent.
“However, Africa’s unique regional profiles, cultural protocols and legislative diversity means that partnering with a resource-rich legal and tax expert is a key component to success,” says Jashwin Baijoo, Legal Manager, Africa Tax and Compliance at Tax Consulting South Africa. He advises that there are certain vital traits that an MNE must insist on in their partner, to ensure their success in navigating Africa. Extensive experience In a continent as unique as Africa, with its rich and varied perspectives on business and diplomacy, it is essential to have the right partner. An experienced partner understands how to best navigate its divergent leadership styles, legal structures, and cultural values. To a company wanting to launch operations efficiently and successfully, this kind of insight is invaluable to its progress. Those who set-out unprepared may find themselves facing many intangible barriers to entry, which can only be overcome with the know-how that comes from experience. Continental network Companies coming to Africa for the first time need to establish trusted relationships with and between many different parties and agents in their target countries. Starting from scratch can result in years of lost opportunities, but an exceptional partner brings pre-existing alliances to the table. For an eager MNE, with no time to waste, it’s a requirement they cannot afford to overlook. In-country expertise A cross-border network is only as good as the quality of the in-country agents who anchor it in their region. A great partner doesn’t just offer high-calibre legal and tax services in their own right but has replicated their excellence at all operational touchpoints. Getting this formula right takes time, energy, and resources, which is exactly what MNEs are trying to save. Strong leadership team A cohesive leadership team is the driving force that pushes an expansion campaign forward. The right partner exhibits a client-first approach to strategic decision-making and assesses localised progress on that basis. Whether it’s a simple tax return for an expatriate employee, restructuring an entire payroll, incorporating a new entity in-country, or providing company secretarial services, a strong leadership team aligns their execution with their client’s desired outcomes. Centralised command Ultimately, MNEs moving into Africa want to achieve command-and-control as quickly as possible. And this is what the ideal legal and tax partner provides: a single point of access to a wide array of local and remote resources not otherwise immediately available to their client. That should include both advisory and technical services they can leverage to achieve their goals. Conclusion MNEs wishing to expand their presence across Africa do better when delegating to a legal and tax partner with a time-tested, continent-wide network of in-country experts. This ensures the MNE’s corporate strategy remains centralized, and efficiently coordinated throughout the process, saving the MNE precious time and money. “Most importantly, through such an agent, the MNE gains total command of their expansion and that accelerates their time to launch, as well as the stability of the entire rollout,” says Baijoo. 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  In his State of the Nation Address, President Ramaphosa announced the imminent release of the highly anticipated updated Critical Skills list for public comment by the Department of Home Affairs (DHA).
The list forms part of a drive to attract critically deemed skills to underpin efforts to regenerate the economy. In support of this important process, Xpatweb is extending its Critical Skills Survey until 1 March 2021 to give industry stakeholders an opportunity to participate in the upcoming immigration change in South Africa. “Xpatweb’s Critical Skills Survey takes place annually and has established itself as an important way of measuring the skills needed in the economy. We were honoured to be asked to present our cumulative findings to the Departments of Home Affairs and Higher Education and Training late last year, and so contribute to the draft list that will be released for public comment,” says Marisa Jacobs, Director at Xpatweb. “We will be making the research, which is currently in the field and with over 200 participants, available to the Government as part of our comment on the draft list. “Keeping the survey open for a further two weeks will give industry players a better chance to make their skills needs known.” Global Competition for In-Demand Skills In today’s sophisticated and highly competitive economies, countries are competing for skills to help them stay abreast of fast-moving technologies and rapidly changing business models. A growing number of countries are using their immigration policies to attract these skills to their shores. For example, Britain recently announced favourable visa conditions for much-needed healthcare workers, and Mauritius has introduced a special fast track for investment professionals as it cements its position as Africa’s financial hub. In addition, multinationals operating in various geographical areas need to be able to expedite the transfer of skilled individuals to their subsidiaries as needed. Accordingly, the implementation of skills transfer plans have become vital due to Covid-19 greatly inhibiting the mobility of foreign skilled workers, thus ensuring locals receive necessary training on these particular skills. Thus far, this year’s Xpatweb Critical Skills Survey shows that occupations in the Engineering and ICT sectors remain most in demand, followed by occupations such as Foreign Language Speakers, a range of Artisans and C-Suite Executive-level Management. “Attracting the skills we need is vital if we are to increase economic output and get the economy back on track,” Ms Jacobs says. Last Chance to Make an Impact “Government’s initiative to fine-tune our immigration system to make it easier for companies to attract the skilled people they need is admirable, and clearly the more data it has to work with, the more accurate the list will be. We’ve already had record participation in this year’s survey, which indicates how important an issue this is. We are urging companies to take advantage of the new closing date to make sure their voices are included in the process of compiling the final critical-skills list.” Xpatweb’s Critical Skills Survey remains open until 1 March 2021 and can be accessed 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 15 years and includes over 100 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: Jashwin Baijoo, Legal Manager, Africa Tax and Compliance at Tax Consulting SA
In these uncertain times many small to medium enterprises (SMEs) do not have the financial means to settle large debts which have accrued to the South African Revenue Service (“SARS”), be it in light of the crippling COVID-19 pandemic, or due to long outstanding debts. Between the business restrictions imposed by the spread of COVID-19 and the resultant decline of the South African economy, a large number of SMEs face troubling times ahead. Have you received a Final Demand from SARS? While SARS has spent the past year implementing collection measures more forcibly than ever before, do not think you have escaped its radar. Like all strategic movers, SARS has been biding its time, focusing on the most prevalent debts, and working its way through every non-compliant taxpayer, calculating interest upon interest and imposing penalties across the board, while you have been forced to operate at limited capacity, thinking a reduced revenue stream was your greatest concern. SARS has in recent months, greatly increased the pressure of its collection measures, with a final demand (“the demand”) being sent to the company or its representative taxpayer, for any and all tax liabilities. SARS follow-through has also become more drastic, with the final demand being ignored as previously would, and SARS going straight for the jugular with a 3rd party appointment or Sheriff’s attachment in lieu of the outstanding amount. As a last port of call, the most drastic collection measure, a forced liquidation, may be implemented by SARS. Companies who find themselves in this situation, feeling like they are staring down the barrel of a gun, wondering how they are going to pay this month’s salaries, do have solutions available, but none so favourable as an application for a compromise of tax debt (“the compromise”). This is a cease-fire which SARS has, in recent times, become more amicable toward, showing great compassion for the financially constrained SME. The Appropriate Response If a business has received a letter of demand from SARS in respect of missed PAYE or VAT payments, action must be taken immediately to avoid the tax debt trap. Tax debt, purported or not, will not go away, but will only spiral out of control and drain the life out of the business, until the taxpayer is drowning in debt and has no way of escape. The Solution Given the unpredictable nature of the pandemic and its devastating effect on the country’s economy, companies should not jump straight to the worst-case scenario and commence with liquidation proceedings. This should in essence be any company’s last resort and is positively preventable by means of engaging SARS in compromise negotiations. The First-Mover Advantage In order to protect yourself from SARS, it remains the best strategy that you always ensure compliance. Where you find yourself on the wrong side of SARS, there is a first mover advantage in seeking the appropriate tax advisory assistance, to ensure the necessary steps are taken to protect both yourself and your bank balance from paying the price for what could be the smallest of mistakes. However, where things do go wrong, SARS must be engaged legally, and we generally find them to be agreeable to the utmost where a correct tax strategy is followed. As a rule of thumb, any and all correspondence received from SARS should be immediately addressed, by a qualified tax specialist or tax attorney, which will not only serve to safeguard the taxpayer against SARS implementing collection measures, but the taxpayer will also be correctly advised on the most appropriate solution to ensure their tax compliance. 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  Authored by: Roxanna Naidoo, Admitted Attorney and Lisa Mihalik, Tax and Legal Administrator at Tax Consulting SA
A new set of tax law amendments, signed by President Cyril Ramaphosa, and promulgated on 20 January 2021 has granted SARS all the legal fire power it needs to impose criminal sanctions on taxpayers who neglect their tax affairs. Criminal Negligence Prior to the promulgation of the Tax Administration Laws Amendment Act, 2020 (Amendment Act) a mistake made by a taxpayer was only a crime when it was done “wilfully and without just cause.” In other words, the law required an element of intent; where negligence or ignorance caused your administrative non-compliance, you would have gotten off with a slap on the wrist. Henceforth, your intention does not matter – where you “negligently” fail to comply or make certain mistakes on your taxes you commit an imprisonable criminal offence. Ignorance, a defence commonly used by taxpayers, will no longer fly – SARS will from now on hold you to a higher standard of care. Strategically speaking, this is a bold, brilliant move from the SARS-Treasury team, as the simple inclusion of the word “negligence”, now allows for the offence criteria to be broadened to such a degree that even the slightest mistake made in one’s compliance could result in criminal prosecution. The 11 Mistakes As the saying goes “we all make mistakes,” but when it comes to mistakes on your taxes each of the 11 mistakes listed in the Amendment Act can result in up to 2 years in prison. So, it is vital that you educate yourself on precisely what they are to remain unmistakably compliant and lawful. What are they?
The Amendment Act just demonstrates that the new SARS Commissioner and the SARS-Treasury team have adopted a complete no-nonsense approach to non-compliance. Given how easily (and how often) these mistakes can happen, and how hard they will be to correct, taxpayers should exercise extreme accuracy and vigilance when filing their taxes. It may serve you well to appoint a qualified tax consultant or experienced tax attorney to ensure you do not end up on the wrong side of these new rules. 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  Authored by: Thomas Lobban, Legal Manager for Cross-Border Taxation at Tax Consulting SA
With South Africa and the world at large facing an economic downturn as a result of various factors, not the least of which being the Covid-19 pandemic, SARS is on a mission to plug the existing gaps in tax revenue collection and compliance. It is no stretch of the imagination to believe that cryptocurrency must be high on the list of SARS’ compliance concerns, given how it has existed under little-to-no regulation and these transactions are often easily concealed. Indeed, cryptocurrency has been steadily increasing in its popularity as a speculative investment by South Africans and, it appears, is now squarely within SARS’ focus. A Request by SARS When a taxpayer files a tax return, SARS may (in many cases) send a request for verification or “audit request” in which it seeks clarification and / or supporting documentation from a taxpayer. The information sought by SARS is inevitably linked to the disclosures made by the taxpayer in that return. This is a preliminary step taken by SARS in audit proceedings, and it is crucial that a taxpayer prepare themselves accordingly for this ahead of time. Tax Consulting South Africa has recently been approached by taxpayers who were presented with a SARS audit request. These requests posed standard questions as would be expected on the taxpayers’ returns, but also went further to request the following:
While this is certainly a first, it is certainly the kind of approach by SARS that taxpayers should expect moving forward. Playing by the Rules In the first instance, taxpayers should already know that it is a criminal offence where a taxpayer wilfully fails to submit a document or information as requested by SARS or makes a false statement to SARS. It is no longer material whether the taxpayer concerned had justification for such non-disclosure or false statement made. This means that a taxpayer who fails to correctly disclose their cryptocurrency-related income or comply with an audit request by SARS to this effect may be convicted for an offence and be liable to a fine or imprisonment for up to two years. In light of this recent change to our tax laws, it is feasible to understand that SARS is in the process of ensnaring culpable taxpayers who have not disclosed their cryptocurrency-related trading profits and / or losses. While further cryptocurrency regulation is certainly on its way, and with the international Common Reporting Standards now in full swing, audit requests are still a primary weapon in SARS’ arsenal and the walls are closing in on non-compliant cryptocurrency traders. So, when is SARS disclosure required? A misconception often harboured by taxpayers is that they do not owe any tax liability on their cryptocurrency-related income and do not need to make any disclosure to SARS to this effect. This is, unfortunately, not the case. When SARS Disclosure is Required From the outset, it should be known that all cryptocurrency transactions will bring tax consequences for a taxpayer. A tax disclosure obligation does not only arise where a cash balance is withdrawn from a trading platform – all transactions that have been made (whether a transaction of cryptocurrency for money or cryptocurrency for other cryptocurrency) must be disclosed to SARS. Taxpayers should take the time to consider and understand the tax consequences when dealing with cryptocurrency, in order to prevent being caught off guard upon a SARS inquiry to this effect. Any taxpayer who has not disclosed cryptocurrency held or traded should immediately seek professional guidance in getting their tax affairs in order. Alternatively, where you have never bought or sold cryptocurrency previously, it is important to proceed with caution when responding to an audit request. As has been well reported, SARS is well within their rights to compel a taxpayer to respond to an audit request. Failing to disclose any relevant amounts or respond to an audit request correctly could well result in substantial penalties or harsh criminal sanctions. There is little doubt that SARS is pursuing non-compliant cryptocurrency traders, so it is best for these taxpayers to stay ahead of the curve and ensure that their tax affairs in order beforehand. Click here to view the SARS audit request mentioned above. 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  Co-authored by; Bryce Nel, Project liaison officer and Jashwin Baijoo, Legal manager of Africa Tax & compliance at Tax Consulting SA
As 28 February 2021 looms near on the horizon, so too does the deadline for the second provisional tax submissions for 2021. This February will be the most important tax submission to date for expatriates earning above the R1.25million threshold as they will now be exposed to a previously non-existent tax liability in South Africa. Johnnie Kruger, Legal Manager for Africa Desk at Tax Consulting South Africa, says the company has been proactive in working with South African expatriates and their corporate clients affected by this change. Over the past year, Johnnie has been visiting and presenting to South Africans in remote locations in the Democratic Republic of Congo, Zambia, Oman, Qatar, Saudi Arabia, and the UAE. "The change to section 10(1)(o)(ii) of the Income Tax Act has caused a lot of confusion for expatriates working in Africa and abroad on a rotational basis. The vast majority of expatriates are still in a dangerous state of non-compliance with the looming 2021-02 provisional tax filing season.” Requirements to claim the exemption Besides the new cap on income, the requirements to claim an exemption are as follows:
This comes as a huge blow to many expatriates who strived to meet this criteria and were previously granted the full benefit of their efforts. The introduction of the R1.25 million threshold means that expatriates need to register as provisional taxpayers if their income exceeds this amount or generate income from more than one stream. Kruger says these changes have added to the confusion among rotational workers in Africa because the process has become more complex. “Expats working abroad will now be required to disclose their foreign income to SARS through the filing of two provisional tax returns, as well as the usual annual tax return every year. An expatriate will therefore need to fulfil three filing obligations within each tax period or face the risk of working abroad under a non-compliant status.” Calculating the provisional tax of expatriates With the closing of the first tax period post-amendment only weeks away, the first provisional filing should have been completed by 31 August 2020, with the payment ready to be made to SARS. Tax Consulting uses the information that clients have made available from the first six months of the year to calculate the value of this return and forecast what they believe to be a true extrapolation for the last six months. "The second provisional tax submission is our opportunity to correct any previous inaccuracies that may have arisen from the need to forecast the entire year based on income earned in the first six months. While the process is slightly more complicated, the main issue I foresee is the large number of expats who are yet to register as provisional taxpayers, which is now urgent.” The amendment has led many South Africans to believe that working abroad is no longer lucrative, but Kruger says there are ways to make it work. “When it comes to tax filing, it is crucial for expatriates to hire the most knowledgeable tax consultants. The fiscal environment for expatriates continues to change. It is possible to ensure you aren’t paying more tax than you are legally obligated to pay and that you are meeting all the government's requirements. Tax Consulting is available to assist expatriates looking to get a handle on their tax compliance for 2021,” concludes Kruger. 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  Jonty Leon, Legal Manager (Expatriate Tax) at Tax Consulting SA.
The President, on 15 January 2021, assented to the Taxation Laws Amendment Act No. 23 of 2020 (“TLAA”), which was subsequently promulgated on 20 January 2021. Despite the blow back last year on the proposed amendment to the withdrawal of retirement funding in SA based on emigration, this amendment has now been signed into law and will become effective on 1 March 2021. The consequence is that from this date retirement benefits will be locked in for a minimum period of three years. Retirement Withdrawals Prior to 1 March 2021 The current legislation allows for a person who emigrates from South Africa and who has formalised their emigration using the “financial emigration” process to immediately upon conclusion of that process fully withdraw their retirement funds. This would include for example the withdrawal of a retirement annuity, prior to maturity of that fund. This has been useful for many South Africans who have left or are currently leaving, as often these funds are used to set themselves up in their new home country. It also allowed for taxpayers to decide to remove their investment and invest in something more viable for their new circumstances. South Africans who have already financially emigrated still have the opportunity to withdraw their retirement funds under the current regime. Those that have finalised financial emigration, or have their full application submitted to SARB prior to 28 February 2021, will now have the opportunity to withdraw their retirement funds under the old dispensation until 28 February 2022. Government has thus provided a one-year extension on what was previously announced, to withdraw those funds with financial emigration. Retirement Withdrawals Post 1 March 2021 Without financial emigration, and from 1 March 2021, taxpayers will only be able to access their retirement benefits if they can prove they have been non-resident for tax purposes for an uninterrupted period of three years. How the new system will practically work is yet to be set out, taking into consideration the policy provider’s requirements, SARS requirements, the need for documentary supporting evidence and proof of non-residency status for three consecutive years. However, what we do know is that a more stringent verification process and risk management test are in the pipelines, if the Budget Speech in February 2020 is anything to go by. So, expect a more difficult time post 1 March 2021. The immediate downside for those that will not be able to withdraw these funds as soon as they need them, is self-evident. However, the longer-term downsides of a lock-in period, which come with far more uncertainty, need to be taken into account as well. Factors to consider: - The 2020 Budget Speech spoke to relaxing regulations around exchange control, which comes as a stark contrast to the legislation passed, which effectively traps retirement funds in SA. If a piece of legislation like this can be passed, seemingly out of nowhere, and with such robust argument in favour of it from National Treasury, where does this take us? There are no guarantees that Government may not decide to extend the three-year period for another three years, or perhaps indefinitely; - Part of the ANC agenda has focused on “prescribed assets” for retirement funds – this narrative is particularly frightening if your funds are trapped in SA. Your retirement fund manager is not allowed to invest your funds as you see best for your retirement; their investment decision is subject to Regulations. If this agenda gains traction, we could potentially find ourselves forced into investments which drives other causes than your direct personal well being. Explained differently, leave your money behind in South Africa to finance Eskom or perhaps SAA; - The ever-weakening Rand may diminish the worth of the retirement fund held in SA. Who knows what the Rand will look like in three years – or more; - The tax rate of retirement fund withdrawals has remained stagnant at a maximum rate of 36%, while the personal income tax rate has increased to 45%. Retirement fund withdrawals are a soft target and there is risk this may increase while your fund is locked in. In Hindsight For many years, we have seen advisors very vocally dismissing the financial emigration process as unnecessary; advising their clients to rather use “quick and easy” solutions which often left room for risk instead of following a formal and far more prudent approach. Judge Dennis Davis, in his foreword to “Expatriate Tax”, published by LexisNexis, characterises advice to do financial emigration where an individual leaves the country with permanent intention not only as sensible, but as correct. With the gift of hindsight, advisors who steered their clients away from financial emigration should perhaps have heeded the Judge’s words. Their clients now find themselves in a precarious position. Professionals at all levels should be held accountable for advising clients to take an approach which at the end of the day is not client-centric. The quickest solution is often not the best solution, especially in the area of tax. Decision Time South African taxpayers who hold retirement funds in SA but are living abroad need to carefully consider their options. Time is of the essence with little over a month to exit under the current regime. With such stark amendments, and an aggressive effort from SARS to recover revenue at all costs, leaving one’s head in the sand or adopting a wait and see approach is certainly not a smart option. 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  Authored by: Jean du Toit, Head of Tax Technical at Tax Consulting SA
South African expatriates have been kept in suspense regarding a proposed law change aimed at providing relief to those who could not leave the country under lockdown. This amendment was confirmed with the promulgation of the Taxation Laws Amendment Act No. 23 of 2020 (“TLAA”) on 20 January 2021, which means these expatriates can now rest easy. The amendment South African resident taxpayers who earn their remuneration in respect of services rendered abroad may qualify for an exemption from income tax of up to R1.25 million. To qualify for the exemption, section 10(1)(o)(ii) of the Income Tax Act determines that taxpayers have to spend more than 183 days in aggregate outside South Africa during a twelve-month period, of which more than 60 days must be continuous. However, due to the travel bans imposed as a result of the COVID-19 pandemic, these individuals could not travel to their countries of employment. For many, this would mean they would not have met the 183-day threshold, resulting in a massive unanticipated South African tax liability. The TLAA reduces the 183-day threshold by 66 days, which means that taxpayers who spent more than 117 days outside South Africa may still qualify for the exemption. The 66-day reduction is based on the period that commenced on 27 March 2020 and which ended on 31 May 2020, when the country operated under COVID-19 alert levels 5 and 4. Important caveats The continuous period of more than 60 days remains unchanged; the concession only extends to the aggregate number of days spent outside South Africa. Equally important, this amendment does not constitute a permanent change to the exemption. It only applies to any 12-month period in respect of any year of assessment ending on or after 29 February 2020 but on or before 28 February 2021. Period of uncertainty The amendment did not form part of the initial 2020 budget proposals and was only introduced when National Treasury and SARS issued their official Response Document after hearing public comments on the draft tax Bills. After its introduction, the proposal was included in the final Taxation Laws Amendment Bill tabled in Parliament on 28 October 2020. While affected taxpayers were pleased to learn of the relief, at this point the amendment was not yet law. It would have been unprecedented if the amendment were not approved by Parliament, but taxpayers could not make any assumptions before its promulgation. In any event, those who will benefit from the amendment can now breathe a sigh of relief. Efficient application It is important to understand that you can leverage the exemption over multiple tax years. This principle, which can be referred to as “double dipping”, can be difficult to apply correctly. This will particularly be the case in the context of the amendment because it is restricted to very specific periods. But it still applies, and taxpayers must plan proactively to ensure they use the exemption correctly and to their greatest benefit. 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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