Authored by:  Jean du Toit, Senior Tax Attorney at Tax Consulting SA

SARS Commissioner, Edward Kieswetter, has used the South African Institute of Tax Professionals’ Tax Indaba as a platform to fire a shot across the bow, letting taxpayers know that non-compliance will be met with the full force of the National Prosecuting Authority (NPA).

The Commissioner has allied himself with the NPA and concluded a new accord in terms of which it seeks the prosecution of a long and growing list of at least 1177 non-compliant taxpayers.

Desperate and dangerous
Taxpayers must take this statement very seriously.

It must be understood that, at the moment, SARS is fighting a war on all fronts – on the account of the Commissioner himself, it is facing an internal battle to clean up the devastation left by the previous tenures, whilst, at the same time, trying to make good on a massive budget deficit and hoping to eradicate a widespread slippage in taxpayer morality.

Times are desperate and SARS has no choice but to proceed on a no-tolerance basis.

Enforcement is key
At the height of its potency, when SARS was one of the most revered revenue authorities across the globe, it operated on three legs, a model developed in SARS’ early years of existence by the then Commissioner for SARS, Pravin Gordhan.

One of these indispensable legs was enforcement, which, seemingly, Mr Kieswetter is intent on reviving.

The Commissioner’s approach is encouraging, as we agree that a compliant tax base is very much key in SARS’ renaissance and the fear of criminal prosecution is certainly an effective mechanism in getting compliance back to where it should be.

SARS’ war chest
For those who may still want to take their chances, it is perhaps important to be alive to the fact that the infrastructure and machinery to effectively prosecute taxpayers are already in place, albeit, in recent times, we have not seen it being used as often as it should be.

However, when SARS chooses to wield its arsenal, it can be devastating.

Those who believe that criminal prosecution is reserved for taxpayers who are involved with high-end tax evasion or the elicit tobacco trade should revisit their convictions.

The Tax Administration Act No. 28 of 2011 (TAA) criminalises a wide array of acts of non-compliance, ranging from seemingly “petty” transgressions such as the failure to file a return or to retain documents, to more serious acts of tax evasion.

Taxpayers must also be cognisant that where they are to any degree implicit in the non-compliance of another taxpayer, they may also face criminal prosecution.

This includes failure to withhold PAYE or instances where a person is involved in a company’s non-compliance.

The TAA does not spare negligent or lax taxpayer’s either, as intent is not always a requirement to fall foul of the criminal offences list.

For example, a person may have started a company and simply never bothered with its compliance, in which case he or she may be prosecuted under the TAA, as well as the Companies Act No. 71 of 2008. A taxpayer’s ignorance can easily result in the NPA, at the behest of SARS, knocking at their door.

Do not tempt fate – it is not too late
The good news is that SARS encourages taxpayers to confess their sins and the TAA makes express provision for such instances in the form of the Voluntary Disclosure Programme (VDP).

The VDP gives amnesty from criminal prosecution, in addition to substantial relief from penalties.

Taxpayers would do well to heed the Commissioner’s warning shot; do not be the one in the orange uniform who galvanises compliance in others.

The key here is “first mover advantage”, as you are legally prohibited from claiming VDP where a tax audit has commenced.

What we would not like to see
The last time SARS started an initiative similar to this, it pursued the softest of targets, such as a celebrity soap star who did not submit a tax return and a small trader in Port Shepstone who failed to submit his VAT returns.

A couple of admission of guilt fines later, and SARS claimed bragging rights.

Whilst everyone should be treated as equal before the law, this probably did not have tax fraudsters quaking in their boots; likely quite the opposite.

Prosecuting with courage
If SARS wants the tax base to know that it means business this time, it should consider the following 

• To date, taxpayers have seen little bang for their buck from the various Commissions of Enquiry. The corrupt do not have the proclivity to pay tax on money in brown envelopes, so we hope, for a change, they will be high on SARS’ hit list.

• The whole of South Africa wonders how we could have such massive budget deficit if the Guptas paid their Capital Gains Tax exit charges under section 9H of the Income Tax Act when they emigrated. If they have not paid their dues upon their departure, their names should be first on the list.

• The ex-KPMG partner Jacques Wessels pleaded guilty and was subsequently struck off the roll of auditors by IRBA for six charges of misconduct that, according to IRBA, resulted in a loss to SARS of more than R2 million in tax revenue. Patently, there is a prima facie case of tax evasion that needs answering and it is perhaps possible that other parties were also complicit in assisting the Gupta-linked firms to perpetrate this offence. Thus far there is no indication that SARS is doing its own investigation into this matter. SARS should set the record straight that it prosecutes tax evasion, with no one spared.

• SARS should consider prosecuting a person from each segment of society; perhaps at least one politician, a professional business person who made a living from VAT collected and not paid to SARS, persons who illegally used offshore trusts and other structures to evade taxes, taxpayers who falsified expenses, a payroll practitioner who helped operating an illegal payroll, etc. When it comes to simple prosecutions like someone who did not do their tax returns, pick someone who will send a message, such as a partner in a law or accounting firm or director of a listed company.

• A special place must be reserved in prison for the tax practitioners who devise these fraudulent schemes to “help” taxpayers in getting away with illegal claims – some of these names must be on the prosecution list, to ensure the deterrence factor reverberates across the tax base.

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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.
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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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Authored by: Jean du Toit and Tanya Tosen from Tax Consulting South Africa

The amendment to section 10(1)(o)(ii) of the Income Tax Act (“foreign employment exemption”) takes effect from 1 March 2020.

Presumably, employees that would be affected thereby have done the necessary planning to sidestep any potential additional tax that may follow the amendment; or at least did their homework to attenuate the impact thereof.

A question with perhaps a less discernible answer is if employers with internationally mobile employees have done the same?

For the Johnny-come-lately employer, it is perhaps important that we provide a refresher course on what the amendment entails.

Currently, the foreign employment exemption permits South African tax residents to fully exempt their employment income earned outside South Africa, provided they spend sufficient time abroad.

From 1 March 2020, foreign earned employment income is no longer fully exempt and any amount above R1 million will be taxable.

The result is a larger tax bill and the question is who will pick up the tab?

Why Should Employers Be Concerned?
This may come as a massive surprise to some, but aside from the many administrative difficulties that employers will have to deal with, in some instances, the additional tax cost will be borne by the employer, as opposed to the employee.

The reason for this misfortune is simple; the employee accepted the assignment on the premise of a set amount of take-home pay and, assuming these employees are likely some of the company’s best resources, the employer may want to recompense the employees for the additional taxes if they wish to retain the said resources.

The realisation that you as the employer may have to foot the bill is only the first step to ensure that you are equipped to deal with the amendment.

Ideally, the employer should tackle this headache by first planning where they assign and resource  their expats from in a careful manner  to mitigate the additional tax cost as far as possible, followed by an equally difficult task, which is to adjust these expatriates’ remuneration packages to ensure they earn a market related net-pay whilst maintaining their agreed upon assignment remuneration packages as per their specific conditions.

Expat Planning
It is important to note that the additional tax cost can be managed effectively with proper planning.

By expat planning, we mean the employer needs to consult each expatriate to gauge their flexibility and educate them accordingly on how this change impacts them.

Depending on the circumstances, the effect of the amendment may be neutralised if certain employees are simply re-assigned to a different jurisdiction.

For lower tax jurisdictions, the employer and the employee may want to consider formalizing the expatriate’s emigration, if appropriate, as these cases will likely occasion the highest additional tax cost.

It is, however, not possible to give a blanket solution to reduce the tax cost, as each expatriate’s factual matrix must be considered individually.

Tax Gross-Up
Where the additional tax cost cannot be neutralised entirely, the employer will have to adjust the employee’s remuneration package.

This boils down to a tax gross-up, which accounts for the additional tax liability.

If you have an ounce of wisdom, this is not an exercise that should be done unaided.

The tax gross up can be conducted in different ways and we would always advise that the employer call in the assistance of a remuneration and tax specialist in these instances.

We often see this being done incorrectly and, with the proliferation of SARS payroll audits, this is not an item where one should take any chances.

Take Away
It would be devastating to lose key resources as a consequence of the incoming law change.

In saying that, in the current economic climate, no employer can afford to suffer any unplanned, additional costs. These will be some of the problems facing employers who simply wait for D-Day to come.

The only way to traverse the obstacles of post March 2020 is to plan correctly and be fully prepared.

A unique expat tax calculator is available, that allows both employers and individual expatriates the opportunity to explore their tax obligation post March 2020.

The calculator provides flexibility for selecting your own currency and exchange rates and allows for the comparison of pre-March 2020 versus post-March 2020 in order to get a good view of your position for future planning.

Follow this link to use the free calculator: www.taxconsulting.co.za/expat-tax-calculator

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

 By: Claudia Apicella, Head of Expatriate Tax Compliance at Tax Consulting SA.

South African expats have been subjected to vast amounts of conflicting information regarding the amended expat law change, causing uncertainty and panic in their preparations for 1 March 2020.

The cause for this is no doubt linked to the many “specialists” creeping out of the woodwork, so to speak, and offering an array of tax relief processes for South African’s residing abroad which ultimately portray “quick fix” solutions or incorrectly completed processes at exorbitant costs.

Many services that are being offered to South African expats, in relation to tax relief mechanisms, are unfortunately not in line with the requirements of the South African Income Tax Act No.58 of 1962’s two tax-residency tests, the South African Revenue Service (SARS) nor exchange control regulations of the South African Reserve Bank (SARB).

What is Financial Emigration?
One of the most common processes being widely publicised is Financial Emigration and has become the weapon of choice when offering South African expats tax relief on their foreign income in preparation for March 2020.

Although, when Financial Emigration is applied for correctly, the process does offer certainty that one has ceased tax residency in South Africa.

The key issue here is that the fundamental steps to achieve this are not always adhered to, thus resulting in a process not correctly done which creates tax exposure for South African expats.  

The harsh reality is that many expats are undergoing “Financial Emigration”, taking into consideration only the exchange control aspects thereof, and thus not dealing with important tax implications.

How will I know that my financial emigration is done correctly resulting in non-residence for tax purposes as well as for exchange control purposes?
Nicolas Botha, Tax Diagnostic Specialist at Tax Consulting SA

This is where careful due diligence is needed.

It is imperative that when undergoing the financial emigration process through a service provider, that all compliance steps for the financial emigration process are clearly defined by the provider to the client.

From a client perspective, the best first step will be to determine if the provider is offering financial emigration or formal emigration. These are often referred to as being the same process, however this is not the case.

Financial emigration- is a two-fold process which includes a SARS component dealing with the legal aspects of non-tax residency as well as the formal emigration component dealing with the SARB aspects of exchange control.

Formal emigration- on its own does not fully deal with the tax aspects.

The best way to check this is if the company requests you to outsource your tax affairs to a tax practitioner or consultant - meaning they only assist with formal emigration.

Tax aspect of Financial Emigration
The first step to a correct financial emigration is a tax check or compliance check with SARS.

Once this check is completed a reputable consultant will be able to advise on the best path forward for the process, in order to ensure that all the compliance “boxes” in regard to ceasing of tax residency are “ticked”.

In order to cease tax residency, one must meet the requirements of South Africa’s two tax residency tests and must complete a deemed disposal as per section 9H of the Income Tax Act.

The deemed disposal, is where one is deemed to have disposed of their worldwide assets, and immediately re-acquired them, thus bringing about a Capital Gains Tax (CGT) event – which is often referred to as an “exit tax” from South Africa.

Once the deemed disposal has been calculated, and the CGT event declared, an application to acquire an Emigration Tax Clearance Certificate (ETCC) should be made to SARS.

Acquiring this is the last step in formalising your non-residency from a tax perspective.

Thereafter you can look towards the second part of financial emigration – the exchange control aspects thereof.

Exchange Control Aspect of Financial Emigration
Roger Aires, Financial Emigration Specialist at Financial Emigration.

The SARB process required for a correctly executed financial emigration is actioned after the SARS process, in line with our Income Tax Act and exchange control regulations.

 The SARB process once concluded will further confirm one’s emigrant status for exchange control purposes.
For the SARB process of financial emigration, there is no requirement that the individual sell nor dispose of any assets in SA to include shares, trusts, properties and policies.

All assets can be kept as long as they are correctly declared to SARB.

One can also successfully complete the financial emigration process should they have properties that are bonded as well as vehicle finance.

In addition, one can keep SA bank accounts as long as they are with one banking institution with no need to cancel such bank accounts and open new blocked asset accounts with another bank.

Escaping Shark Infested Waters
The crux of the matter is that undergoing the correct financial emigration process will prove one’s intention to permanently reside outside of South Africa which coincides with South African tax residency tests – thus the formalisation of both exchange control and tax residency statuses being noted as “non-resident”.

We strongly recommend that proper due diligence is followed when using a provider for something as important as Tax Residency and Financial Emigration to avoid unwanted tax exposure come 1 March 2020.

Secure a provider who has registered tax practitioners and admitted tax attorneys with a long track record of successfully completed Financial Emigrations to help you navigate into safer waters.

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 latest unemployment statistics released by Statistics SA for the second quarter of this year paints a very dark picture of the state of South Africa’s labour market.

According to the statistics there has been an increase of 1.4 percentage points in unemployment from the first quarter of this year. This means that almost 7 million people are unemployed and just over 16 million people have a job.

A recent critical skills survey by Xpatweb shows several sectors in the economy are experiencing critical skill shortages. The sectors experiencing the most pressure include information and technology, engineering, finance and health.

The Critical Skills list is currently under review by the Department of Home Affairs and a new list is expected to be released before the end of 2019 for public comment.

However, the Xpatweb survey shows that the country is currently in desperate need of the following skills:

•  ICT Specialist
• Engineers
• Artisans
• Senior Financial Executives
• Health Sector
• Executive Managers
• Specialists & Academics
• Mining Executives
• Risk Managers
• Foreign Language Speakers

IT specialists and engineers remain top of the list of skills that are most difficult to find. Occupations in high demand in terms of the health sector, artisans, finance and ICT specialist have all increased this year.

According to the World Health Organisation (WHO), South Africa has an average of one doctor and one nurse per 1,000 patients. Hospitals are crowded, but understaffed, as shortages of skilled professionals in this sector continues to be an issue.

IT Specialists are becoming a highly sought-after resource in the wake of the Fourth Industrial Revolution (4IR). In a report published by the World Economic Forum over one-third of skills (35%) that are considered important in today’s workforce will have changed over the next five years.

By 2020, the Fourth Industrial Revolution will have brought us advanced robotics and autonomous transport, artificial intelligence and machine learning, advanced materials, biotechnology and genomics.

Government revealed in 2017 that South Africa has a shortfall of about 40,000 qualified artisans. This forced it to import skilled artisans from various countriesto complete time sensitive projects.

The Xpatweb survey results show that this still remains an issue, with 14.15% of the respondents indicating that it is difficult to find skilled artisans. This represents an increase of 45% from last year.

There is little doubt that skills are essential to economic growth, job creation and the future prosperity of South Africa.

It is a growing challenge worldwide, affecting industries from ICT to manufacturing to finance, with jobseekers lacking the required skills, and those with the desired capabilities and experience, in high demand.

Employers have to compete locally and internationally for skilled talent which increasingly places pressure on organisations.

The Xpatweb survey also showed that 62% of participants blamed the visa process as the greatest prohibitor to recruiting internationally.

However, several visa-related reforms are on the cards, which is in line with President Cyril Ramaphosa’s Economic Stimulus and Recovery Plan. This includes a review of the critical skills list expected to be published later this year.

Xpatweb is once again conducting its survey and the 2019 results will be submitted to the Department of Home Affairs and Parliament in line with the White Paper on International Migration and Department of Higher Education and Training National List of Occupations in High Demand and specifically to address any occupations not catered for on the new draft list.

The survey offers an opportunity for mobility and human resource practitioners to help shape law. (See link below to participate in this year’s survey).

In order to tackle the skills shortage in SA, it is important that policies such as the Skills Development Plan and the Skills Development Act support job creation and economic growth. It is equally vital that organisations contribute to building local skills, through increased training and development and putting in place succession planning at executive level.

For the youth, it cannot be stressed enough that when choosing a career, it is important to do the necessary research in terms of occupations in high demand and to use the information when making decisions about which path to pursue.

Link to survey http://www.xpatweb.com/critical-skills-survey-2019/

ENDS
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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/

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