 Mauritius has been a popular holiday destination for South Africans for many years, but the government’s recent concessions have made it more accessible and affordable for South Africans to retire, live and work than ever before. In June 2020, the Mauritian government’s changes to investment thresholds, the extension of work, residence, retirement permits, and attractive property acquisition options, led to renewed interest from South Africans, says Marisa Jacobs, Director at Xpatweb.
“Skilled professionals and business owners with families in South Africa are taking note of Finance Minister Renganaden Padayachy’s changes and adjustments for foreigners. It is now easier to buy property, work, as well as retire on the island, which is appealing for many, including business owners, corporates and families in South Africa who are looking for a new place to call home,” says Jacobs. Extending retirement permits and lowering investment requirements In the past, South African retirees were only able to obtain a three-year permit for Mauritius. This has been extended to ten years, with the requirement that the individual earns a recurring income of $1,500 per month. The amount can be paid annually, quarterly, or monthly, as long as it works out to $1,500 per month. “The extension from three to ten years gives retirees more certainty about their future in the country. Mauritius’ Permanent Residence and Work Permits have been combined into a single permit and extended from ten to twenty years,” says Jacobs. The minimum investment to obtain an Occupational Permit (OP) has also been halved from $100,000 to $50,000. The parents of an OP holder may now obtain a dependent permit to live in Mauritius. Professionals who are working as independent contractors can qualify for the self-employment permit. The requirement for this permit is a deposit of $35,000 into their Mauritian bank account, and this permit is also valid for ten years. “Working professionals and self-employed individuals who want to move their spouse and aging parents find these concessions favourable, especially if their dependents are no longer working,” says Jacobs. Property acquisition Buying property is still a popular route of entry for those looking to move to Mauritius. In the past, foreign nationals were required to invest $500,000 in the property. This number has now been reduced to $375,000. “The dispensation for owning property in Mauritius is far more flexible than in most other African countries. In Mauritius, a South African is allowed to purchase a property as a freehold, or through a 99-year lease agreement with the option of renewal,” says Jacobs. The island boasts excellent private schools, reputable banking systems, regulatory certainty, technology-driven government systems, as well as an efficient and linear tax system. “The effective tax rate of 15% for individuals are well below those applicable to South Africa and other countries. A significant difference is that Mauritian residents are only taxed to the extent of the money that they bring into the country. These financial incentives, combined with the close proximity to South Africa, will likely see more people moving to Mauritius in the 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 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/
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 While expats are allowed to return to South Africa, many are reluctant to do so due to the stringent requirements that need to be met to get permission from the Department of Home Affairs, says Leetasha Govender, Immigration Specialist at Xpatweb.
“Expats are ready to return home, but the hoops they need to jump through are too cumbersome for some to book the flight,” says Govender. One of the categories of expats that is now considered for return is called “exceptional need to return,” and it applies to long-term visa holders who are returning to conduct work that is in line with the economic growth and/or development of South Africa. “If a long-term visa holder wants to return to South Africa, they will be considered depending on their positions and the reputation of their employer. The likelihood of a South African employee within the company being able to temporarily fill the role until border-lockdown has been lifted is also one of the DHA’s considerations,” says Govender. Your job must be of national interest to SA In addition to the above, DHA will further only consider applications within industries that the Department of Trade and Industry (DTI) considers to be in the national interest of the country. These industries include green industries, advanced manufacturing, resource-based services such as BPO, oil and gas, ship building and repairs, manufacturing or such other industries that may be deemed important or of national interest. Govender says that family reunion and study are among the other categories of travel which are considered by the DHA for retuning expats. “Sufficient proof must be submitted to support an application for family reunion or study. The expat must have resided in South Africa for more than six months and have a valid temporary residence visa to apply under this category,” says Govender. Exemptions and applications Certain categories of expatriates remain excluded from entering the Republic. These include expatriates who are travelling from visa-exempt countries for short-term visits or business trips, as well as those from high-risk countries. “Should you need to enter South Africa due to exceptional circumstances, and are unsure whether you may be eligible for consideration, contact us at travel@xpatweb.com or leetasha@xpatweb.com for an assessment,” concludes Govender. 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 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/  The first period for provisional tax ends on 31st August. Provisional taxpayers must therefore have submitted their initial IRP6 return and settled any payments due by that date.
“In addition, COVID-19 relief allowances make the calculation of estimated tax all the more complicated,” warns Thamsanqa Msiza, Head of Individual Tax Returns at Tax Consulting SA. He advises those who wish to take advantage of this relief to act promptly to beat the deadline. If not, they could incur stiff penalties on late submissions and interest on outstanding amounts. The same applies for underestimation of their taxable income. They should review the following to ensure they remain compliant. Check your registration Typically, anyone who earns income above the tax threshold from sources other than employment must register with SARS as a provisional taxpayer and pay provisional tax, even if they are employed full-time. Companies are automatically provisional taxpayers. However, some parties are excluded if they meet certain conditions so it’s best to check personally or through a tax professional familiar with current requirements. To be safe, they should also check their registration status directly with SARS. Understand COVID-19 relief While many provisional taxpayers qualify for COVID-19 relief, some do not, such as those whose tax affairs are non-compliant. The ones who do qualify may defer a portion of their first and second period tax payments, offering an immediate relief to cash strapped taxpayers Normally, they would pay 50% of their total tax liability in the first period and the balance in the second period. In the 2020/21 year, they can pay just 15% of their total tax liability in the first period, 65% in the second, and the remaining 35% in a third payment period. Provided all amounts are paid off by the end of the third period, they will not be subjected to penalties or interest. “It’s important to understand that the tax obligation is only deferred and must be settled within the allowed timeframe,” says Msiza. Check your calculation This standard advice is doubly important with COVID-19 relief. Provisional taxpayers should note that the tax calculated is for the first half of the year, not the entire year. However, the percentage of payment due is calculated against the entire year and not the current period. “For those with sophisticated streams of income, the shift in percentages could lead to a gross miscalculation, resulting in unnecessary losses,” says Darren Britz, Head of Legal at Tax Consulting SA. Such parties should not attempt to make last-minute submissions without the assistance of a qualified tax professional. Check your income Even those with firm control of their finances may misunderstand how certain income is viewed under law. For example, cryptocurrency is not immune to taxation and will be treated in accordance with how it is acquired or disposed of. Paid as income, it is taxed as income; won in a competition, it is taxed as a windfall; disposed of as an asset, it may attract capital gains tax; and so on. “However, there are other complex financial instruments and arrangements whose resultant value may manifest as provisional tax,” says Britz. Again, he encourages those earners to approach their tax practitioner or tax attorney to avoid being penalised for evasion. “With only a few days until the deadline, they must act now,” he concludes. ENDS MEDIA CONTACT: Rosa-Mari Le Roux, 060 995 6277, rosa-mari@atthatpoint.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: Jerry Botha, Managing Partner & Jean Du Toit Head of Tax Technical at Tax Consulting South Africa.
The draft Taxation Laws Amendment Bill (“TLAB”) was published on 31 July 2020. As announced in the Budget Speech, any South African leaving in future will be subject to a much stricter process from 1 March 2021 onwards. But there was also a surprise 3-year lockup announcement for anyone with a South African pension fund, seeking to leave South Africa. This appears a sign of things to come for private pensions in South Africa. Anyone with a proper pension, ideas to move abroad or just not trusting governments plans with your pension money; needs to “read the room” and make careful decisions. Current position under law Under the current dispensation, the definitions of “pension preservation fund”, “provident preservation fund” and “retirement annuity fund” in section 1 of the Income Tax Act No. 58 of 1962 (“the Act”) contain a proviso that entitles a person to withdraw their retirement benefits before retirement age. This applies where that person “is or was a resident who emigrated from the Republic and that emigration is recognised by the South African Reserve Bank for purposes of exchange control”. In essence, this proviso, which reads the same for each of these definitions, permits a person to withdraw their retirement benefit upon completion of a process of emigration through the South African Reserve Bank. Proposed amendment The proposed amendment follows the February Budget Speech, where the government made its intentions clear to overhaul this process as part of the modernisation of our exchange control system, as stated in Annexure C to the Budget Review: “As a result of the exchange control announcements in Annexure E, the concept of emigration as recognised by the Reserve Bank will be phased out. It is proposed that the trigger for individuals to withdraw these funds be reviewed”. The TLAB, specifically paragraphs (h), (k) and (m) of section 2(1), gives effect to this decision, by amending the proviso to the aforementioned definitions in section 1 as follows: “is a person who is [or was] not a resident [who emigrated from the Republic and that emigration is recognised by the South African Reserve Bank for purposes of exchange control] for an uninterruptedperiod of three years or longer” (emphasis added) In other words, reference to the emigration process is substituted with a new test that requires a person to prove they have been non-resident for tax purposes for an unbroken period of at least three years. This new test will apply from 1 March 2021. How this must be proved other than ‘financial emigration’ remains unclear at this stage. Practically, after the effective date, your retirement benefits will be locked in South Africa for at least three years. The proposed amendment signals a big policy shift from a fiscal perspective, but this is one piece to a bigger puzzle that should have those who seek to emigrate on high alert. The bigger picture The ANC’s 2019 Election Manifesto expressly states that the party will “Investigate the introduction of prescribed assets on financial institutions’ funds to unlock resources for investments in social and economic development.” The discussion on “prescribed assets” has also been mentioned by President Cyril Ramaphosa and it effectively involves compelling retirement funds to invest in government-backed assets or invest directly in government infrastructure projects. The government’s intent to push this initiative was confirmed in the ANC Economic Transformation Committee’s discussion document, published on 8 July 2020 and which states that “Changes should be made to Regulation 28 under the Pension Funds Act to enable cheaper access to finance for development.” This is critical because Regulation 28 under the Pension Funds Act No. 24 of 1956 is the main hurdle that prevents government from imposing the prescribed assets policy, as it requires funds to act in the best interest of its members. It would be very difficult to reconcile the prescribed assets policy with Regulation 28 in its current form, especially where it means investing in State-Owned Enterprises such as SAA, Eskom and the SABC. This appears to explain the move to amend it. What does this mean for your retirement fund? The amendment may be argued as only a draft proposal written into law or a simple by-product of a shift in exchange control policy; but do you risk your retirement life savings on assumptions of governments good intentions? This change forces the following categories into immediately making some tough decisions on their retirement. Even leaving your status quo means you have decided to subject yourself to a 3 year lock-up, retirement funding investments being subject to a “new” Regulation 28 which services “cheaper access to finance” as opposed to maximising your retirement. Who are most impacted? Our daily interaction with employers, executives and expatriates indicate that the following categories should give this careful consideration –
MEDIA CONTACT: Rosa-Mari Le Roux, 060 995 6277, rosa-mari@atthatpoint.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  Author: André Daniels, Tax Attorney at Tax Consulting SA
The South African Revenue Service (SARS) has undertaken to make the filing of annual tax returns for the 2020 filing season as seamless as possible for individuals who diligently fulfil their tax obligations. At the same time, SARS wants to make it as difficult and as costly as possible for non-compliant taxpayers and criminals who abuse the system. At Tax Consulting, we welcome the media statement of 30 July 2020 by Commissioner Edward Kieswetter. If the statement is in fact a commitment to name and shame those convicted of criminal offences, and is implemented, it will certainly act as a deterrent, supporting SARS’ efforts to curb the decline in tax morality. However, we encourage taxpayers who have made errors or who have omitted certain income in prior year’s tax returns, for whatever reason, to take up the opportunity to regularise their affairs through the Voluntary Disclosure Programme (VDP). The income areas typically undeclared includes foreign interest income, foreign/local rental income and employment income where an employer does not provide their employee with an IRP5. The VDP was designed to encourage taxpayers to approach SARS before their non-compliance is detected. Voluntariness is one of the requirements as contained in the Tax Administration Act, which regulates the VDP. Process for non-disclosure Taxpayers who have already attracted the attention of SARS due to non-compliance, by being selected for an audit, or who have already received a final letter of demand, will unfortunately not be able to participate in the VDP. They will have to go through the normal processes by correcting their errors which will attract penalties and interest in addition to the outstanding tax liabilities. They may even expose themselves to criminal prosecution. A major benefit of relief sought through the VDP, is that it covers all tax types (income tax, employees’ taxes such as Pay-as-You-Earn, Unemployment Insurance Fund contributions and the Skills Development Levy, as well as Value-Added-Tax). The only taxes that are not covered are customs and excise duties. When a taxpayer is granted relief under the VDP, penalties are waived, and the applicant receives amnesty from criminal prosecution. The taxpayer will only be liable for the outstanding tax liability as well as the interest levied thereon. Be aware of your world-wide income Many a time, the reason for the non-disclosure of foreign income is due to the fact that taxpayers are unaware of their true tax liability, and which jurisdiction has a taxing right. The South African tax system changed from a source-based system to residency-based system in 2001 – meaning that South African tax residents are taxed on their world-wide income. However, many South Africans with property abroad have been oblivious of this change and have not included foreign interest income or foreign rental income in their tax returns for many years. We advise taxpayers who have become aware of any non-disclosure of income to come forward and apply for relief through the VDP. It is important that documentation evidencing the income to be disclosed is used to support the VDP application to quantify amounts, especially during the last five years, in order to satisfy the record-keeping requirement. It is understandable that many will lack the necessary documentation in order to quantify the undisclosed income and therefore calculate the outstanding tax liability, due to the fact that undeclared income may span all the way back to 2001, when the tax law was amended. SARS will allow the submission of reasonable estimates, based on more recent documentation, if it proves impossible to obtain older documentation. Once the taxpayer has satisfied SARS that they have made a full and complete disclosure, and complying with all other legislative requirements, the VDP process will be finalised. A look to the future of VDP applications We have, in recent times, seen a marked improvement in the finalisation of VDP applications. In the past, it was not uncommon to wait up to two years after having submitted a VDP application for the appointment of an evaluator. Recent applications submitted by Tax Consulting have been finalised within two to three months. It should be noted that if a taxpayer has been granted relief under the VDP, they will only be able to apply for VDP relief in respect of a similar offence in five years’ time. This is to prevent taxpayers abusing the system to have their penalties waived. 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  SARS’ announcement that it has started auto-assessing certain taxpayers may lead some people to believe they no longer need to worry about their tax submissions.
This is not the case, according to Thamsanqa Msiza, Head of Individual Tax Returns at Tax Consulting South Africa. “The onus still lies with the taxpayer to ensure all information submitted to SARS is complete and correct,” he says. So before accepting the precompiled assessment, they should take the time to check that all relevant data is present and accurate. Neglecting to do so may be seen by the tax authority as a deliberate attempt to evade tax and could result in stiff penalties. What is a SARS auto-assessment? With modern digital technologies at its disposal, SARS is able to collect electronic tax data from employers, financial institutions, medical schemes, retirement annuity fund administrators and other 3rd party data providers. As such, it can compile and assess tax submissions with little input from the taxpayer. SARS announced that, during August, it will assess a large number of taxpayers automatically in this way, reportedly around 3.1 million. They will be notified by SMS and can access the precompiled assessment through eFiling or SARS’ MobiApp. Here, they can review the assessment and click an Accept button to accept the figures, or click an Edit button to amend the information. “Apart from this being a new system and therefore prone to teething problems, there are several other reasons why the precompiled information may be inaccurate,” warns Msiza. What to watch out for Even those who are employed may earn extra on the side from gigs, property rentals or other sources of income. Similarly, individuals who are self-employed and have received taxable earnings exceeding R83,100 in the 2019/2020 tax year, will be considered Provisional Taxpayers and must declare this income as SARS will have no record of it. Other instances highlighted by Msiza include an investment tax certificate, for example, appearing on the assessment although the taxpayer holds no such investment. Or an employer may fail to submit a copy of the employee’s IRP5. There may also be outstanding deductions, like log book mileage against one’s travel allowance, that can only be captured from an employee’s own records. Or donations for which no tax certificate has been loaded on the return. “In cases like these, the taxpayer must approach the issuer to correct the data and resubmit it to SARS promptly,” says Msiza A convenience, not a pass A SARS auto-assessment will be a welcome convenience for many. However, it doesn’t take all the work out of tax submissions and does not release the taxpayer from the responsibility of declaring all their earnings accurately. “If you receive an SMS notifying you that you have been auto-assessed, take the time to check the preloaded information carefully against your own tax certificates,” advises Msiza. Those with complex tax affairs should be particularly cautious and should seek direction from their tax attorney or tax practitioner. This way, they will avoid unpleasant surprises later on and assure themselves that they have made effective use of any tax relief to which they are legally entitled. 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
The draft Taxation Laws Amendment Bill (“TLAB”) was published on 31 July 2020 and with it comes an overhaul of the regime for taking your retirement funds abroad. In terms of the proposed amendments, expatriation of these benefits will be subject to a much stricter process from 1 March 2021 onwards. Current position Under the current dispensation, taxpayers may withdraw their retirement funds prior to their retirement date, upon emigration for exchange control purposes, where such emigration is recognised by the South African Reserve Bank (“financial emigration”). This concession is provided for in the respective definitions of “pension preservation fund”, “provident preservation fund” and “retirement annuity fund” (collectively referred to as “retirement funds”) in section 1 of the Income Tax Act No. 58 of 1962 (“the Act”). Each definition makes provision for withdrawal where a person “is or was a resident who emigrated from the Republic and that emigration is recognised by the South African Reserve Bank for purposes of exchange control”. The law in its current form has undergone several amendments, but in principle the concession was first introduced with the Taxation Laws Amendment Act No. 3 of 2008. Taxpayers were warned The amendment comes as no surprise, as government made its intentions clear in the February Budget Speech, per Annexure C to the Budget Review: “As a result of the exchange control announcements in Annexure E, the concept of emigration as recognised by the Reserve Bank will be phased out. It is proposed that the trigger for individuals to withdraw these funds be reviewed”. Now that day has come. Proposed amendment The Explanatory Memorandum to the TLAB echoes what was said in the February Budget, that the regime change arises as a result of the modernisation of the exchange control system. The Explanatory Memorandum further notes that “a new test should be inserted which will make provision for payment of lump sum benefits when a member ceases to be a South African tax resident”. The change is brought about by the amendment of the relevant definitions in section 1 of the Act, by the substitution of the reference to the emigration process with a new test which only allows withdrawal in respect of “a person who is not a resident for an uninterrupted period of three years or longer”. This may seem like a complete deviation from the previous position, but where one studies the development of the current law in detail, it is evident that tax residency and the financial emigration process (if done under the correct circumstances) are inextricably linked. Arguably, this is revealed by the amendment, as the administrative process has now been stripped away, leaving only the fundamental element of tax residency. In any event, from 1 March 2021, withdrawal of retirement benefits will only be allowed where a person can prove they have been non-resident for tax purposes for an unbroken period of at least three years. How will the test be applied? It is important to note that in terms of section 102 of the Tax Administration Act No. 28 of 2011, the taxpayer bears the onus of proof. So, it will be on you as the taxpayer to prove to SARS that you have been non-resident for the required time period. However, the determination of a person’s tax residency is very much an exhaustive, fact-driven enquiry. It is inconceivable to see how SARS will accept an assertion of non-residency unless you have indicated a cessation of residency in your tax return at some point. Such a declaration must of course be well-considered, as this would trigger a deemed capital gains tax event under section 9H of the Act. Where you have factually ceased residency but have not indicated this on your return, you may have some difficulty explaining this to SARS. Final remarks There is no certainty on the administration of the new test at this stage and some clarity is required on transition to the new rules. For example, how will SARS deal with cases where the process of financial emigration has commenced but is not concluded by 1 March 2021? Will SARS treat those who have initiated the process under the old rules? Those with an ounce of wisdom would not sit around to find out. Where your facts permit, you should avail yourself to the path of least resistance and formalise your emigration promptly. 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
The new Draft Tax Administration Laws Amendment Bill (“TALAB”), released on 31 July 2020, proposes a law change that will effectively lower the threshold for SARS and the National Prosecuting Authority (NPA) to criminally prosecute taxpayers. The proposed amendment The proposed amendment is directed at paragraph 30 of the Fourth Schedule to the Income Tax Act, section 58 of the Value-Added Tax Act and section 234 of the Tax Administration Act. All of these provisions cater for offences committed by taxpayers. More importantly, all of them provide that a taxpayer will be guilty of a criminal offence if they “wilfully and without just cause” commit certain acts or fail to meet certain obligations. The rationale behind the proposal is that our law makes provision for two types of culpability i.e. intention and negligence. Reference to “wilful” acts means that negligent conduct, which is measured objectively against what a reasonable person would have done in the circumstances, is excluded from the ambit of the offences referred to in these sections. National Treasury and SARS appears to be fed-up with excuses and wants to remove the hurdle that they must prove that the taxpayer’s conduct was “wilful and without just cause”. National Treasury is on record that the NPA is of the view that this substantially undermines the ability of SARS to ensure compliance and hampers the NPA’s ability to prove the elements of the crime. For this reason, it is proposed to remove this common wording, so SARS and the NPA can measure taxpayers’ conduct against the standard of reasonableness and hold them criminally accountable if they fail to observe it. Controversial policy change? Make no mistake, this change signals a violent change in policy, which may stem from SARS’ much anticipated new hard-line stance on tax non-compliance, which includes calling out tax dodgers publicly. The proposed amendment has already invited some impassioned ranting and will no doubt be the subject of some heated debate in Parliament. But we do not expect National Treasury and SARS to accept any unjustified criticism. They have been called out to get tax criminals behind bars and this law amendment will give them the tools; perhaps an overstep, perhaps not. On these items we generally have found National Treasury and SARS to be well researched and they will presumably be ready with international examples of other tax jurisdictions where similar measures have been implemented successfully. Public comment on the new tax bills are due on 31 August 2020 and this amendment will probably invite the most comments from members of the public and industry stakeholders. Those who feel it is extremely unfair that being forgetful on your taxes can now make you subject to a 2-year prison sentence, to remedy your forgetfulness; can write to SARS at acollins@sars.gov.za or National Treasury at 2020AnnexCProp@treasury.gov.za. What does this mean for taxpayers? The legislative process must still take its course, but taxpayers should err on the side of the caution and proceed as if the change will become law eventually. This will mean that ignorance or neglecting one’s tax affairs may effectively result in criminal sanction. Critically, where you have a blemished compliance history, your transgressions may have more serious consequences if uncovered after the new law change. The only sure-fire way to avoid this is to disclose acts of non-compliance by filing an application under SARS’ Voluntary Disclosure Programme, which provides full amnesty from criminal prosecution. Either way, the law change may serve as a cue for taxpayers that taking ownership of their tax affairs now becomes even more important. While there have been many calls for getting tax criminals behind bars, many would argue this may be a step too far. Whether those who criticize the change will have the courage of conviction to take this to the Constitutional Court, remains to be seen. However, for the standard South African, the simple position of safety is to make sure your taxes are fully compliant and not to take risks. Where you are unsure, get a tax diagnostic done. 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 Jonty Leon, Legal Manager at Financial Emigration
Government Moving to Hold onto South African’s Retirement Funds On 31 July 2020, the Draft Tax Law Amendment Bill (“TLAB”) contained a hidden announcement, which may prove to be the final straw for many ex-South Africans who still have retirement investments left in South Africa. The TLAB seeks to legislate to prevent a South African who has exited South Africa’s tax base, to withdraw their retirement funds from South Africa, until an unbroken period of 3 years has passed where that person can prove non-tax residency. This new test has never been raised in any Budget Speech or policy document. Also, this is a far cry from the current legislation which allows South Africans who have financially emigrated, and specifically concluded the exchange control portion of financial emigration to remove their retirement funds from South Africa upon such emigration being recognized by the South African Reserve Bank. Simply put, you have 7 months to execute a well-planned withdrawal strategy or you will be legislatively prohibited from withdrawing your retirement for at least a very uncertain 3 years. The Change was Foreseen Over recent years, there has been a substantial increase of South Africans formalizing their status as “non-resident” from both a tax and exchange control perspective, by using the financial emigration process. With this, many had decided to withdraw their retirement funds from South Africa and invest in a more stable economy. One of the biggest reasons for the formalization of non-resident status with SARS and SARB was due to the punitive tax regime implemented by government on 1 March 2020, which reduced the foreign employment exemption to R1.25mil. South Africans have been flocking to cease tax residency, where they have met the very specific requirements to do so, to avoid this tax regime. The financial emigration process in its current form, done correctly, has been achieving this successfully. Unsurprisingly, with so many people having exited and continuing to exit the tax base, government took the decision to crush the outflow by proposing to change the way in which people exit, instead of dealing with the core issue – a punitive tax regime for South African tax residents abroad. This change was proposed in the February 2020 Budget Speech, where it was announced that the exchange control portion of financial emigration would be phased out by 1 March 2021 and replaced with a new system. A system which was set to be more complex, or at the very least more stringent taking into account the wording that was used in February 2020. We also know Government has been eyeing retirement funds, as there has been various indirect statements made to that effect. This proposed law change now seems to pull all these strings together. 28 Feb 2021 deadline, but the time to start is now The proposed changes will likely come into effect on 1 March 2021 according to the TLAB and will allow a person to withdraw their retirement funds from SA, “who is not a resident for an uninterrupted period of three years or longer”. The Explanatory Memorandum to the TLAB goes on to say that “a new test should be inserted which will make provision for payment of lump sum benefits when a member ceases to be a South African tax resident”. This is indicative that previously and currently one would be able to withdraw their retirement funding when ceasing tax residency, albeit also ceasing exchange control residency. Thus, financial emigration in its current form has been that mechanism to cease residency under both. It would seem that government is more interested in when a taxpayer ceases tax residency over exchange control residency – for obvious reasons. This gives people until 28 February 2021, a mere 7 months, to withdraw their retirement funds from South Africa before the new regime and new “test” are implemented. A word of caution is that the financial emigration process takes months; so ex-South Africans cannot wait until the last moment to start the process. 6 Important Planning Steps From a practical perspective, seeing the system operate on a daily basis, the following should be considered –
Slipping this surprise law change into the TLAB only confirms what many expatriates and ex-South Africans have been sensing. It may very well be the last straw as the safety of retirement funding has been one of the few positives which South Africa has offered. Whilst the TLAB process must still run its course, one must question the wisdom of an approach to “wait and see” whether this one will be legislated. If you are wrong, you may just jeopardize your future retirement. 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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