 Authored by: Jean du Toit, Head of Tax Technical & Reabetswe Moloi, Admitted Attorney at Tax Consulting South Africa
South Africans emigrating to greener pastures may be prevented from leaving the country - or worse - if their application for tax clearance is denied by SARS. Recent changes to expatriate tax procedures and SARS’ dramatically improved auditing capabilities mean the exit process is more stringent than ever. So, taxpayers must ensure they are fully compliant before embarking on it. Worldwide taxation Local tax laws require every South African to declare and pay taxes on their worldwide income, even if they moved to another country years ago. SARS does not tax the first R1.25 million of these earning. However, financial emigration provides a legal escape from this obligation. That said, this method should never be pursued without the guidance of a reputable expatriate tax specialist. Above all, never try to skip the country without completing this process because SARS can use new international information sharing agreements it has with other jurisdictions to track you down anywhere you go. SARS’ capabilities Financial emigration was previously a two-step process involving both SARS and the Reserve Bank. From 1 March 2021, SARS became its sole custodian and its focus has been on ensuring emigrants cannot depart until their taxes are paid-up. SARS has been investing heavily in technologies like AI and data analytics, as well as integration with third-party databases, like the deeds office and financial institutes. This allows them to compare taxpayer declarations with their actual sources of income, asset holdings and investments. We’ve begun seeing more in-depth audits that highlight and question disagreements between SARS’ records and those of third parties, and demand that the taxpayer submits explanations with supporting documents as to why these exist. In addition, SARS used to breeze over trusts. These days, it will request its assets and liabilities statements, list of shareholders and disclosure of any offshore assets it may have. It is therefore essential that every piece of information submitted to SARS contributes to a true and accurate record of the taxpayer's position as a whole. Threats With SARS’ enhanced auditing and data gathering capabilities, emigrants face threats that could delay and even abort their plans for a new life. First, anyone whose tax affairs are not in order will be exposed. It is imperative that they review their compliance in advance and resolve issues before applying for clearance. Previously, those who were wilfully non-compliant in their tax submissions could be prosecuted. A change to law in January 2021 now allows SARS to similarly charge those who are non-compliant simply because of negligence. A taxpayer who cannot explain each and every discrepancy in their exit audit may therefore find themselves in court. Further, if they do not respond to SARS’ request for additional information when applying for clearance, they can be charged for wilful non-compliance as well. Future uncertain A rocky exit process is best avoided as it can derail relocation plans that are typically time-sensitive. Keeping an overseas employer waiting while you sort out your taxes leaves a poor first impression. A delayed departure can run up costs like temporary accommodation, storage of household assets and cancelled flights. Worst of all, prosecution resulting in a criminal record could make a once welcoming destination near impossible to set foot in. Becoming compliant by addressing any past indiscretions and settling outstanding taxes is always preferable to seeing one's dreams disappear on the horizon. It's also the outcome favoured most by SARS. Advice Financial emigration remains the cleanest and only legal way to relocate abroad permanently without future tax obligations, but it’s a complex journey, even for the compliant taxpayer. While any tax consultant can complete your annual returns for you, it's best not to take chances when emigrating. There are too many fly-by-night operators who won't stick around long enough to share your regret when you receive an unexpected SARS audit notice years from now. Always approach an experienced advisor that specialises in expatriate tax and offers a strong legal component. In other words, they are backed by in-house tax attorneys who will represent you in court if the need arises. Under no circumstances hide information about your income, assets or investments from your expatriate tax advisor. SARS will come across it when you make your application so, at the end of the day, you are only doing yourself a disservice. With all your information at their disposal, your advisor will be in a better position to help you. They can offer comprehensive planning and determine the best options for your needs. It may just be a piece of paper but a tax clearance certificate is the real ticket out of South Africa. And the only way to buy one is to be fully tax compliant. 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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 Authored by: Jean du Toit, Head of Tax Technical at Tax Consulting SA
The President has given effect to the 2020 tax proposals by signing three tax Acts into law. On 15 January 2021, the President gave his assent to the Rates and Monetary Amounts and Amendment of Revenue Laws Act No. 22 of 2020 (“Rates Act”), the Taxation Laws Amendment Act No. 23 of 2020 (“TLAA”) and the Tax Administration Laws Amendment Act No. 24 of 2020 (“TALAA”). These Acts were promulgated on 20 January 2021. The Rates Act gives effect to changes in tax rates and certain monetary thresholds, whereas the TLAA and the TALAA contain more profound technical and administrative changes. Highlighted below are 10 key changes taxpayers need to know. 1.Withdrawal of retirement funds upon emigration From 1 March 2021, taxpayers will no longer be able to access their retirement benefits upon completion of the emigration process through the South African Reserve Bank, commonly referred to as “financial emigration”. After this date, taxpayers will only be able to access their retirement benefits if they can prove they have been non-resident for tax purposes for an uninterrupted period of three years. Importantly, taxpayers can still access their retirement benefits under the old dispensation if they file their financial emigration application on or before 28 February 2021. If you miss this deadline, your retirement benefits will be locked in for a period of at least three years 2.Anti-avoidance rules bolstered for trusts The anti-avoidance rules aimed at curbing tax-free transfers of wealth to trusts have been strengthened to prevent persisting loopholes. The amendment is directed at structures where individuals subscribe for preference shares with no or a low rate of return in a company owned by a trust connected to the individual. Ongoing changes to these rules again bring into question the thinking that trust structures are tax efficient. 3.Reimbursing employees for business travel expenses Employees are not subject to tax on an amount paid by their employer as an advance or reimbursement in respect of meals and incidental costs where the employee is obliged to spend a night away from home for business purposes, provided it does not exceed the amount published in the Government Gazette. The TLAA includes an amendment which extends the treatment to expenses incurred on meals and other incidental costs while the employee is away on a day trip. It is important to note that this will only apply if the employer’s policies expressly make provision for and allows such reimbursement. 4.Relief for expats confirmed Due to the travel restrictions under the Covid-19 pandemic, the days requirement for the foreign employment exemption has been reduced from 183 days in aggregate to 117 days. The relaxation only applies to the aggregate number of days and the requirement that more than 60 of the days spent outside South Africa must have been consecutive remains applicable. This amendment is not a permanent fixture and will only apply to any 12-month period for the years of assessment ending from 29 February 2020 to 28 February 2021. 5.Employer provided bursaries The Income Tax Act makes provision for the exemption of bona fide bursaries or scholarships granted by employers to employees or their relatives. Historically, employees used this exemption as a mechanism to structure their remuneration package to reduce their tax liability. The exemption will no longer apply where the employee’s remuneration package is subject to an element of salary sacrifice; that is where any portion of their remuneration is reduced or forfeited as a result of the grant of such a bursary or scholarship. 6.Tax treatment of doubtful debts The doubtful debt allowance provision has been amended to bring parity between taxpayers that apply IFRS 9 and those who do not. Where the taxpayer does not apply IFRS 9, the amount of the allowance is calculated after taking into account any security that is available in respect of that debt. 7.Roll-over amounts claimable under the ETI The Employment Tax Incentive Act has been amended to encourage tax compliance. The amendment determines that excess ETI claims of employers that are non-compliant from a tax perspective will no longer be rolled over to the end of the PAYE reconciliation period. 8.Estimated assessments The terms under which SARS may issue an assessment based on an estimate has been expanded. SARS may now issue an estimated assessment where the taxpayer fails to respond to a request from SARS for relevant material. The amendment also bars the taxpayer from lodging an objection against the estimated assessment until the taxpayer responds to the request for material. 9.SARS can withhold your refund if you are under criminal investigation In terms of the Tax Administration Act, SARS is entitled to withhold refunds owed to taxpayers in certain circumstances. The TALAA expands these provisions to determine that if you are subject to a criminal investigation in terms of the Tax Administration Act, SARS is entitled to withhold any refund it owes you, pending the outcome of the investigation. 10.Criminal sanctions for minor tax offences Previously, a taxpayer would only be guilty of a criminal offence for non-compliance under the Tax Administration Act if they “wilfully” failed to comply with their tax obligations. With the new amendments, non-compliance will constitute a criminal offence where it is as a result of the taxpayer’s negligence. In other words, intent is no longer required; where you are non-compliant as a result of ignorance of your obligations, you may be found guilty of a criminal offence. These offences are subject to a fine or imprisonment of up to two years. Final comments Taxpayers need to speak to their advisors to understand these changes and special heed must be paid to the administrative changes that are now law. The most important change that applies to all taxpayers is the one that criminalises negligent non-compliance. This and other administrative changes mean that taxpayers will be held to a higher standard, which serves as a cue for everyone to take ownership of their tax affairs. 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 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  Authored by: Jean du Toit, Attorney and Head of Tax Technical at Tax Consulting South Africa
The Pretoria High Court has granted SARS’ application to preserve more than R4bn in state capture loot. SARS’ victory in these urgent court proceedings reveals the importance of the taxman’s involvement in recovering proceeds of state capture and bringing the beneficiaries to book. With little to show from the State Capture Inquiry thus far, SARS’ intervention reminds us how powerful tax legislation can be in dealing with complex crimes. Lest we forget, it was the taxman who tripped up some of the most notorious and organised criminals of the twentieth century. State of the Inquiry The cost of the State Capture Inquiry is currently hovering at around R800m. This is not the only judicial investigation funded by the public in recent times, but it is by far the most expensive and the end is not yet in sight. But, even with some damning testimony by several witnesses, South Africans have not yet seen any bang for their buck. The truth is, we are light years away from seeing any convictions on criminal charges such as corruption, bribery or fraud. The state’s onerous burden of proof, the complexity of these crimes and the resources required to investigate them are but a few factors that mean that it can take the National Prosecuting Authority (NPA) years to build a robust case. Even then, a conviction is by no means guaranteed. Tax law v criminal law There is a reason why federal prosecutors turned to tax law to get a conviction against individuals such as Al Capone. Tax evasion is not a crime that concerns itself with the legality of the receipt, the purpose thereof, by whom it was paid or what it was used for. The taxman simply needs to establish if the loot was in fact disclosed and disclosed correctly. For this reason, tax evasion is a far more attainable conviction because proving the elements of the crime is plain sailing when compared with for example corruption or fraud. This case is no different; SARS’ application to preserve the funds is based on the fact that the funds were incorrectly claimed as a tax-deductible expense. The testimony at the State Capture Inquiry has provided the smoking gun and if SARS deploys some of its finest investigative auditors, it will make life very difficult for those who shared in the loot. SARS holds the key The Tax Administration Act bestows upon SARS wide powers to act swiftly and decisively, as demonstrated in this case. If the proceeds of state capture are to be recovered through the criminal justice system, chances are we may never see those funds again. SARS on the other hand has a powerful arsenal to collect the money if it determines that it was not taxed as it should have been. The NPA should team up with SARS, follow the money and obtain early convictions for tax evasion. That is not to say that the NPA should not eventually pursue other, perhaps more serious, charges. In fact, this will give the NPA time to build an unassailable case on other charges in the meantime. This strategy ensures for a slam-dunk upfront and it is quite possible that it may lead others to join the likes of Angelo Agrizzi to come forward, to strike a deal that may lead to the bigger fish ending up behind bars. ENDS MEDIA CONTACT: Rosa-Mari le Roux , 060 995 6277, rosa-mari@thatpoint.co.za, www.atthatpoint.co.za ABOUT Tax Consulting SA: Tax Consulting SA offers a streamlined service in the calculation and filing of individual income tax returns, provisional income tax returns or any other more complex individual tax relate matters. Our highly qualified team of Tax practitioners are registered with SARS under controlling body of the South African Institute of Tax Practitioners (SAIT). As tax specialists, we remove the burden from clients to keep their tax affairs in good order, achieving optimal tax savings while ensuring full compliance. For more information on Tax Consulting please visit: Website: http://www.taxconsulting.co.za/ LinkedIn: Tax Consulting South Africa Facebook: Tax Consulting South Africa  Authored by: Thomas Lobban, Jean Du Toit & Jonty Leon from Tax Consulting SA
This week, on 26 November 2019, the National Assembly passed the latest tax bills, which is set to be promulgated by the President after it has been passed by the National Council of Provinces. On the face of it, some concessions have been made for individual taxpayers, but these offer cold comfort in the bigger scheme. Proposed Amendments Before we get to the truly profound implications, it is important to note the following amendments:
At first glance, it appears that there are no profound amendments to the Income Tax Act or the Tax Administration Act that would raid the pockets of taxpayers, to generate additional revenue. This is peculiar, since the prevailing budget deficit is a massive elephant in a room with grim economic prospects and a junk credit rating. However, taxpayers must not be fooled. In the current economic climate and with SARS so far behind on collection, it is unlikely that the 2019 legislative cycle would not have been put to good use the drum up some more money. Government is smart enough to understand that big changes cause controversy, as we have seen with the VAT rate increase or the amendment to the exemption on foreign employment income. With no such amendments, were taxpayers truly given a tax break in light of the current economic landscape? No Change Means More Revenue In truth, the biggest change by far is not a change at all, nor is it actually found in the Income Tax Act or Tax Administration Act. The Rates and Monetary Amounts and Amendment of Revenue Laws Act, 2019 proposes no amendment to the tax brackets which prescribe the rates of tax applicable to individual taxpayers. In a country with a relatively high inflation rate, this is a problem, since the salaries of employees generally increase in line with inflation. Where the tax brackets do not increase correspondingly, this results in so-called “bracket creep”. In real terms, while this means that individuals are technically earning more, they are actually taking home less pay each month as compared to the previous year. In fact, in many cases taxpayers may be pushed into a higher tax bracket. The upshot is the taxpayer’s pay increase is wiped out by additional taxes. It should also be mentioned that this is the second year in a row that the tax brackets have not been increased, which means that taxpayers will need to further reduce their cost of living for another year, in order to make ends meet. While this will not necessarily affect lower income earners, it will certainly have a significant impact on the already overburdened taxpayers in the middle- and higher-income brackets. This also affects those who will be withdrawing lump sum benefits from their pension interest. In this case, the special tax rates applicable to these amounts also remain unchanged. This means that these persons will be forced to enter into retirement with less cash available to defray their cost of living – an unfortunate consequence of bracket creep. Say Good-Bye to South Africa’s High Earners The long-term effect of these changes (or lack thereof) can only realistically be determined over time. This is an effective measure to generate revenue over the short term, but the question must be asked; how much financial constraint taxpayers are willing take before it becomes unsustainable and individuals simply decide to leave South Africa? We have already seen a massive jump in South Africans deciding to leave the tax net by formally noting their non-resident status by financially emigrating from South Africa. As it stands, National Treasury is already relying heavily on the higher earning segment of the individual tax base and measures like these forces the hand of taxpayers who are already contemplating their departure. Ultimately, we lose important taxpayers and their descendants to the tax base permanently, which leads to less revenue for government. Cunning as it may be, it would seem that government’s band aid is a temporary fix that will exacerbate a far larger problem. 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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