Author: Nicolas Botha, Tax Diagnostic and Financial Emigration Specialist at Financial Emigration
 
Incorrect information and advice from tax practitioners, or in some cases South African Revenue Service (SARS) officials, has resulted in the misunderstanding of complex South African expatriate tax legislation, which has landed many South African in deep water with SARS.
 
This has led to many expats being under the incorrect impression that their tax affairs are in order, as a tax practitioner is handling their financial matters.
 
However, often further investigation reveals that tax submissions are in many cases incorrect, or at least partially so. This could lead to serious legal implications with SARS, should this not be rectified.
 
Common Misconceptions
Many expats are informed that should they meet a simple days-test (183-61 days) they are no longer required to file tax returns or do not need to declare their foreign income in South Africa. Many expats have therefor been incorrectly filling returns showing only South African sourced income; zero returns or in severe cases not filling returns at all.
 
If you are a South African working abroad and have not formally ceased your tax residency you are legally required to submit tax returns every year declaring your worldwide income. Should you then meet the requirements of section 10(1)(o)(ii) of the Income Tax Act No.58 of 1962 you will be able to exempt tax on your foreign earnings.
 
This section states:
•          10(1) There shall be an exemption from normal tax-
•          (o) on any form of remuneration-
•          (ii) received or accrued to an employee during any year of assessment by way of any salary; leave pay; wage; overtime pay; bonus; gratuity; commission; fee; emolument or allowance, including any amount referred to in paragraph (i) of the definition of gross income in section 1 or an amount referred to in section 8, 8B or 8C in respect of services rendered outside the Republic by that employee or on behalf of any employer, if that employee was outside of the republic-
•          (aa) for a period or periods exceeding 183 full days in aggregate during any period of 12 months; and
•          (bb) for a continuous period exceeding 60 full days during that period of 12 months
•          And those services were rendered during that period or periods
 
Meeting these requirements will afford you a full exemption on all foreign earned income during this period. However, as of the 1st of March 2020, an amendment made to section 10(1)(o)(ii) comes into effect, this places a R1-million cap per annum on the exemption. Thus, foreign income earned exceeding this cap will now be subject to tax in South Africa.
 
SARS Won’t Find Out
As of June 2017, South Africa joined the Common Reporting Standard (CRS), this was created to combat tax evasion and is the sharing of tax and financial information on a global scale.
 
Currently there are 97 countries who have already joined the CRS, which includes the European Union; United Kingdom; Australia; Canada; China; Kuwait; New Zealand; Qatar; Saudi Arabia and the United Arab Emirates. Thus, all your global earnings are now being shared from various financial institutions and revenue authorities globally.
 
This includes:
•          Names, addresses, tax numbers and identification numbers relevant to place of birth.
•          Bank account numbers.
•          Account balances for the relevant calendar year.
•          Any capital gains acquired from the sale of properties or investments.
 
Therefore, when SARS cross references the information they are receiving from the CRS with what you have declared on your tax returns and the two do not align, expats could face implications ranging from penalties to criminal prosecution for tax evasion.
Solutions
 
Be prudent in your approach to your tax affairs, explore your options and don’t take any information at face value as ignorance is not a valid or legal defence.
​
Seek professional advice from experts in the field of expatriate tax law and ensure that you understand the requirements that affect you.
 
ENDS

MEDIA CONTACT: Idéle Prinsloo, 082 573 9219, idele@thatpoint.co.za, www.atthatpoint.co.za
 
For more information on Financial Emigration please visit http://www.financialemigration.co.za/

Author: Tasia Brummer, Immigration Administrator at Xpatweb
 
The White Paper for South African Migration was released on 28 July 2017 by the Department of Home Affairs. Whether you have foreign workers in South Africa, South African workers abroad or deal in any capacity with these changes, there is now a unique window to get your house in order and contribute to this important development in emigration law.
 
The White Paper aims to improve the management, security and influx and outflux of foreign and local nationals within South Africa and the current regimes thereof. Not only will foreign nationals whom are sojourning and those who wish to sojourn in the Republic be affected, but South African citizens who work abroad must also take note of important changes.
 
Points Based System – Easier for the foreign national families
The Paper proposes that a “points-based” system be put in place for migrants who hold skills, potential investments and/or have business interests within the Republic. Thus, we are adopting a more strategy based and flexibility approach. This system may be adjusted considering the qualifications, experience, capital availability and willingness of the transfer of skills from foreign nationals.
 
Expats with scarce skills will too be required to transfer their unique skills and experiences to citizens of South Africa. This will further fill the skills gap within the labour market and decrease the scarcity of the needed skills. The acclaimed Critical Skills list will be reviewed to ensure that ‘scarce skills’ aren’t over-capacitated.
 
This will make it far easier for the correct expatriates to access long-stay visas. Furthermore, which can only be applauded, expats’ immediate family may apply as one unit and will thus enable the family members to conduct work and study without needing to apply for alternative visas. This is a large positive compared to current where accompanying family members are not allowed to work unless married to a South African citizen.
 
The toothbrush test is coming
It further proposes ‘Marriage Clearance Certificates’ to be issued to foreigners whom intend to enter into spousal relationships with citizens. This regime is only to ascertain the status of the marriage and to ensure that respective foreigners are not married in their home countries.
 
The process hereof is yet to be identified, but, like in the American movies, this will be where they put you in different rooms and check that you know the colour of your spouse’s toothbrush, who sleeps what side, is the pillow had or soft and how you feel that your mother-in-law interferes in the marriage.
 
Permanent residency to longer
Permanent residency is proposed to be replaced with longer term visas in order to dismiss the misunderstanding that expats may have in terms of progressing to citizenship by only taking into consideration the number of years they have spent in the country. The progression is thus aimed at expats who hold the necessary qualities of which will contribute to the South African economy.
 
Accordingly, the “point-based system” will further monitor on whether a person may qualify for short- or long-term residency and will result on whether they may apply for permanent residency and/or citizenship. Consequently, process of residency and citizenship will be deemed to be delinked.
 
South African citizens
Although the White Paper focuses solely on the Migration to South Africa, it does however further mention that citizens in the Republic whom intend to emigrate for a period longer than three (3) months will be mandated to apply for registration as per the Department of International Relations and Cooperation (DIRCO). This is to ensure that ‘strong ties’ are maintained together with the development agenda for the country, but we can see that SARS will probably also be very interested in this database.
 
Immediate actions
Although the White Paper focuses solely on the future, there are two immediate takeaways –

1. Where you have been part of the previous emigration law changes, you will freshly remember the painful the change-over. Perhaps there will be quicker policies and procedures in place this time, but this remains a gamble. The current VISA processes operate very smoothly where correctly done, so the bankable position is to secure your expatriate permits and status before the change. This means the new system can settle down before you have to apply again.

 

1. Where you are a corporate employer or have critical skill employees, the White Paper gives you a rare opportunity to comment now on the changes. This can either be directly submitted, or please email me and we will ensure this is added to our submission to the Minister.

 

1. The change to permanent residency will have significant impact on current expatiates planning to stay longer. Now is the time for them to assess their situation and consider application under the more lenient existing regime.

 
Photo caption: Tasia Brummer

ENDS
 
MEDIA CONTACT: Idéle Prinsloo, 082 573 9219, idele@thatpoint.co.za, www.atthatpoint.co.za
 
For more information on Tax Consulting please visit:
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