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

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

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

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

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

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

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

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

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

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

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

Lastly, SARS has begun a two-pronged attack strategy:
-          Firstly, through audits calling for individual expatriates to prove they are non-residents and justify their intentions – some audits calling for proof that the taxpayer had obtained an Emigration Tax Clearance Certificate when leaving South Africa; and
-          Secondly, by audits on offshore income revealed through the common reporting standard (CRS). According to Leon, this comes as no surprise, as SARS is targeting those who have historically been able to “hide” assets and funds, but which will no longer be possible due to the exchange of information between jurisdictions.

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

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

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

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

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

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 Department of Higher Education and Training (DHET) has submitted its preliminary Critical Skills List to the Department of Home Affairs (DHA) for review.

“The list is publicly available from the DHET’s website and companies should start reviewing it in anticipation of a round of public commentary before it is finalised,” says Marisa Jacobs, Managing Director at Xpatweb.

Jacobs confirmed that Xpatweb’s own research was used as a refence of input for the DHET Occupations in High Demand (OHID) report and, subsequently, informed the preliminary Critical Skills List by the DHET.

Availability
The current Critical Skills List was published in 2014. Significant macroeconomic events have affected the country’s foreign skills demand since then, like the advent of the Fourth Industrial Revolution and the impact of COVID-19. This makes the new list vital to enabling the recruitment of emerging business-critical talent internationally to promote economic growth.

Jacobs anticipates that, with the recent publishing of the OIHD report from the same research base, the momentum of that work will carry forward to the finalisation of the new Critical Skills List.
“The new List is likely to be published in early 2021,” reports Jacobs.

Exclusions
Notably, several occupations on the current Critical Skills List have been excluded from the preliminary list. These include corporate general manager; risk assessor; certain ICT designations; electrical and chemical engineer; toolmaker; pressure welder; boilermaker; certain trades, such as millwright, pipefitter, double-coded welder and rigger; foreign language speaker; and business analyst.

This may concern employers who have difficulty sourcing these skills locally. Visas for foreign nationals listed on the Critical Skills List are typically processed two to six months faster. This puts companies who urgently need to replace scarce workers not on the List at a disadvantage.

“To make their needs heard, organisations must provide feedback proactively as the opportunity to comment becomes available,” says Jacobs. This will ensure the finalised list aligns with actual national business requirements.

Input
As the only private company invited to present its findings in an interdepartmental session to develop the OIHD, Xpatweb provided research from its own Critical Skills Survey, taken annually over the last five years. This research is also incorporated into the DHET’s preliminary Critical Skills List.

Jacobs believes Xpatweb’s participation can be attributed to the quality of its Survey data. “Of the 32 occupations listed in our report, 24 were already included in the preliminary List, so there was a significant complementary overlap in the research” she says.

The Survey provides a channel for organisations to pre-emptively participate in initiatives like the development of the national Critical Skills List. “Instead of waiting for the public comment process, they can contribute to the early stages of policy formulation,” says Jacobs.

Conclusion
Jacobs urges organisations to become active players in the final Critical Skills List. “This will help ease immigration constraints that may limit access to occupations essential to economic growth,” she says.

She also commends the DHET and DHA for their outstanding work and for openly engaging the private sector.

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: Jean du Toit, Head of Tax Technical at Tax Consulting SA

The days where SARS shuts its eyes to taxpayers’ offshore holdings are thing of the past. SARS is finally utilising the Automatic Exchange of Information regime to pin down taxpayers who have not disclosed their offshore interests and numerous taxpayers have already received some alarming notices to this effect.

The notice
The notice informs the taxpayer that SARS intends to initiate a review of their tax affairs, based on information it received from 87 foreign jurisdictions through the Automatic Exchange of Information, regarding the offshore holdings of South African taxpayers.

After recovering from the shock of the introductory words of the notice, SARS extends an olive branch and states that it wishes to engage with the taxpayer first, in the interests of administrative justice. The consolation is short-lived though because SARS then proceeds to direct a detailed and onerous information request at the taxpayer.

This starts off with a request to confirm that you have offshore holdings and then requires detailed information regarding the amount invested, the nature of the investment and the location thereof. The final question asks the taxpayer to explain why this was not disclosed on their tax return.

As if SARS knows your next move, the notice asks the taxpayer to inform them in the response if they intend to file an application under the SARS Voluntary Disclosure Programme (“VDP”).

The notice signs off by reminding the taxpayer that they have 21 working days to respond to this Gordian knot of a request and reminds you that a failure to do so constitutes a criminal offence.

What to do next
It is perplexing that SARS almost invites taxpayers to do a VDP, even after they have received this notice. It is critical to note that a VDP application must be “voluntary”, otherwise it does not meet the requirements of a valid VDP application under section 227 of the Tax Administration Act.

Technically, if the SARS notice prompts the taxpayer to come forth and file a VDP application, it may not be considered “voluntary”. It is not clear if SARS is making a concession on this aspect, but it would be very interesting to see if the VDP Unit will accept an application if it was filed pursuant to this notice.

In any event, it is important to note that the SARS notice does not give you the option to either respond or to file a VDP; it just asks you to confirm your intention. You are still very much obliged to respond to SARS’ queries. If you have received such a notice, you would be well-advised to speak to a professional, before you respond, especially if you have not disclosed your offshore interests to SARS.

First-mover advantage
If you have undisclosed offshore interests and you have not yet received this notice, then you have a small window to file a VDP application in the ordinary course. A timeous VDP application may avoid the unpleasant information gathering process initiated in terms of this SARS notice and provides you with amnesty from criminal prosecution and understatement penalties.

If you have an ounce of wisdom, this will be your immediate course of action. Be warned though, the VDP process may be the path of lesser resistance in this instance, but it should not be undertaken without the help of a professional.

deally, you should speak to an attorney who offers legal professional privilege and who is well-versed in this process.

Take away
For those with undisclosed offshore holdings, this should serve as a wake-up call. SARS now has the means and the guile to uncover your interests and, with prevailing budget constraints, SARS has no choice but to turn to untapped pools of revenue. It is no longer a question of if SARS will come knocking, but when.

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