 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 South Africa
SARS has taken a critical step in rebuilding the revenue authority by launching a massive recruitment drive. SARS is looking to appoint 370 experienced and highly skilled individuals, as well as 200 legal, accounting and other graduates in the fields of tax, customs and auditing. These additional resources will enable SARS to fulfil its promise to crack down on the wealthy and to criminally prosecute delinquent taxpayers. Words into action This announcement marks two years to the day since National Treasury announced that Mr Kieswetter will take over the reins at SARS on 1 May 2019. Since then, we have heard of several initiatives to rebuild SARS, specifically directed at enforcement. But the elephant in the room has always been SARS’ ability to follow through on its strategic objectives, given its capacity issues. However, with an additional budget of R3 billion, SARS has taken a critical step in achieving its objectives; a drive to replenish the resources lost under the previous administration. With this move we can now expect to see SARS’ initiatives being implemented. Wealthy taxpayers no. 1 on SARS’ list The Minister of Finance made it clear as day that enforcement among wealthy taxpayers will be central to SARS’ strategy in coming months. It is reported that several individuals have already been identified for investigation and will receive notices in April 2021. Those who remain sceptical about SARS’ ability to do so should have a closer look at the recruitment list. Among the experienced hires, SARS is looking to employ a Director of High Net Worth Individuals, who will be complimented by specialist investigative auditors that will be appointed to focus on this segment of the tax base. The once far off idea of lifestyle audits, detection of offshore assets and the untangling of complex trust structures is now a reality. The window of opportunity for these individuals to apply for voluntary disclosure relief (VDP) is closing rapidly. Criminal prosecution More importantly, the recruitment list has a strong message for the entire tax base – the appointment of criminal investigators. Most should know by now that the bar for criminal prosecution of tax offences has been lowered. SARS and the NPA pushed for this law change specifically because they found it too difficult to prosecute taxpayers for minor tax offences. With the promulgation of the tax Bills in January, SARS and the NPA no longer need to prove that you had the intention to be non-compliant; you can be held criminally liable if you negligently fail to meet your tax obligations. The transgressions that could mean a potential prison sentence include failing to update your registered details, not responding to requests for information and not retaining documentary records. The recruitment list reveals, unsurprisingly, that SARS intends to make use of this law change, to enhance its deterrence factor. The higher purpose The recruitment release, titled “SARS – A future reimagined”, on the one hand sends a very positive message to taxpayers – government is committed to restore SARS to the revered institution it once was, where SARS officials were motivated by SARS’ “higher purpose” to serve the people, a mantra instilled by the first Commissioner for SARS, Mr Pravin Gordhan. On the other hand, it serves as a cautionary notice to those who have succumbed to the decline in taxpayer morality – non-compliance will no longer go undetected, and it will be costly. If you have treated SARS with contempt you should perhaps see this announcement as their final warning to speak to them via the VDP, before they speak to you. 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 process of financial emigration, which is the process that allows a taxpayer to formally place themselves on record as a non-resident for tax purposes with the South African Revenue Service (SARS), recently changed and came into effect on 1 March 2021.
Jonty Leon, Legal Manager (Expatriate Tax) at Tax Consulting South Africa, says the company has seen an increased volume of inquiries regarding the benefits of financial emigration, the new process, as well as the timelines involved in financial emigration. “The advantage of financial emigration is that it allows you to cleanly cease tax residency of SA, ensuring your foreign income and foreign assets are ring-fenced outside of SARS’ jurisdiction. Financial emigration used to be a tax and exchange control process, but the new process means that financial emigration has become solely a tax process. The exchange control process created an additional set of administrative challenges with financial institutions, which is no longer the case. Under the new financial emigration regime, there are no disadvantages for those who intend to reside outside of the country permanently,” says Leon. In-depth audits and proving non-residency As SARS will no longer be able to tax an individual on their worldwide income and assets once they have ceased tax residency of SA, the institution has ramped up its collection power to ensure the taxpayer has truly met the requirements to cease tax residency. This translates to more in-depth audits from SARS to ensure these taxpayers meet the criteria of non-residency. “For many years, South Africans abroad have flown under the radar. Many expats are still of the opinion that they are no longer liable to pay tax in South Africa if they have been abroad for many years. It is important to note that the process is not automatic, and the burden of proof always lies with the taxpayer. SARS now has a team dedicated to investigating and recovering tax from South Africans abroad who have not ceased their tax residency in South Africa,” says Leon. Steps involved in financial emigration The individual seeking financial emigration must be entirely up to date and compliant with SARS. This compliance extends to any South African trusts or companies that they are linked to, which must also be fully up to date and compliant. The taxpayer must then pass two tests to determine tax residency outside of South Africa, namely the Physical Presence test and the Ordinarily Resident test. After this, they can submit an application with full supporting documentation to SARS for an Emigration Tax Clearance Certificate. The application will include an “exit tax” that is calculated on certain worldwide assets as well as a declaration of all South African assets and liabilities. Only once this has been audited and approved by SARS can the taxpayer consider themselves a non-resident for tax purposes. Leon concludes by advising people to partner with a reputable tax advisory firm with experienced, admitted attorneys in their team. “Taxpayers must follow the most transparent, formal route to financially emigrate to ensure a taxpayer can overcome their burden of proof when ceasing tax residency.” 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, Legal Manager, Cross-Border Taxation at Tax Consulting South Africa
There are many South Africans who have made investments into cryptocurrency, and we see all types of traders and investors on a daily basis. It has announced a new dawn of investment world-wide and regulators world-wide have been sluggish to respond. However, it is now firmly on the tax radar for revenue authorities world-wide; and the position of SARS seems to be no different. The walls are closing in on crypto traders In the 2021 Budget Speech, Minister Tito Mboweni announced that SARS will be provided with an additional allocation of R3 billion to “modernise its technology infrastructure and systems, expand and improve the use of data analytics and artificial intelligence capabilities, and participate meaningfully in global tax compliance initiatives”. In addition to audit letters recently sent to taxpayers enquiring about their cryptocurrency-related holdings and activities, the Commissioner of SARS, Edward Kieswetter, has further stated following the 2021 Budget Speech that “[u]ndisclosed offshore assets, including crypto-assets such as bitcoin, will be a big area of focus.” SARS seems to be looking at cryptocurrency as an area of additional tax revenue, and with the ability to raise 100% penalties and strengthening of criminal offenses provisions where an innocent mistake can now give you a criminal record, the law is very much in SARS’ corner. Now, the infrastructure is already being put in place to ensure that the shortfalls of SARS’ current information-gathering and tax revenue collection mechanisms are systematically closed. SARS has already included questions concerning cryptocurrency in the capital gains tax portion of tax returns, and have further created source codes for cryptocurrency-trading profits (2572) and losses (2573) respectively. This means that there is no room for a taxpayer to manoeuvre in light of non-disclosure in their returns. United States Example – Are They Smarter? The much feared Internal Revenue Service (IRS) has similarly embarked on a drive to bring previously undisclosed cryptocurrency amounts into their tax net. However, compared to SARS, it appears that the IRS is taking a much more robust approach, as no one messes with the IRS. The United States have strategically placed the question about cryptocurrency holdings on page one of their tax returns (known as a 1040, which makes for a joint tax filing by a family). All United States citizens and green card holders are thus forced to answer accurately, eliminating any defences later. Their question reads whether the relevant taxpayer did, at any time in the tax year, “receive, sell, send, exchange, or otherwise acquire any financial interest in any virtual currency”. This means that, regardless of whether or not and how cryptocurrency was acquired by the taxpayer, they are expected to disclose this to the IRS. In 2019, more than 10 000 letters were sent to taxpayers who had carried out crypto transactions and who may have failed to report their income and pay the tax owed. In South Africa, it seems better late than never for SARS, who are only recently engaging in their cryptocurrency compliance and enforcement project. Nevertheless, this does not mean that taxpayers should expect any leniency from SARS for incorrectly or undisclosed cryptocurrency transactions. SARS is increasingly being forced into a space where it must drop its soft gloves approach in helping taxpayers being compliant and putting up billboards about how good taxes are for the country. They now have the additional R3 billion allocated towards SARS for this purpose, and it appears that they have been given 3,000 million to go out and collect even more. Full disclosure to mitigate exposure Contrary to what many traders and investors believe, cryptocurrency can be tracked and traced with the correct expertise and resources. This may be through direct questions posed by SARS to a taxpayer in terms of an audit letter, or by way of more indirect questions (e.g., asking questions with reference to outbound money transfers by the taxpayer and withdrawals from known cryptocurrency platforms). Remember, technology does not forget and once you have clicked on even a cryptocurrency ad, your digital footprint is already there. Taxpayers need to understand the tax treatment applicable to cryptocurrency trading ahead of time and take the necessary steps to ensure they are able to meet their obligations. If taxpayers have already been trading in cryptocurrency and have not given the tax consequences much thought, it may be wise to seriously start considering the regularisation of their affairs with SARS. Recent changes to our tax laws in South Africa mean that SARS no longer has to prove that someone had an intention to commit a criminal tax offence. Instead, only negligence on the part of the taxpayer needs to be proved. Upon conviction, a taxpayer may be fined or sentenced to up to two years in prison and, if found to have attempted tax evasion or to obtain an undue refund, this may result in them spending up to five years in prison. It is clear that cryptocurrency remains a key concern for revenue authorities and the issue will not be going away any time soon. As SARS continues to evolve its infrastructure to clamp down on non-compliance in relation to cryptocurrency, taxpayers need to be mindful of their obligations and render unto Caesar what is due or face the consequences of continued non-compliance. 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 (Expatriate Tax) at Tax Consulting SA.
Financial emigration is the process used by many South Africans abroad to formalise their non-resident status for both tax and exchange control purposes, and which is set to be amended, as mentioned a year ago in Budget 2020, and come into effect on 1 March 2021. Since the initial announcement, there has been zero public consultation, draft Regulations or anything else publicly released, on exactly what the new process will look like. However, finally the South African Reserve Bank (SARB) has released its comments to authorised dealers on how the new regime will commence. Financial Emigration With the new regime comes a host of positives and negatives. Positive is that the antiquated legislation around exchange control for the process is completely falling away, however on the other hand, the tax treatment of the process will be more stringent with a focus on tax residency only, potentially making it more onerous to overcome the burden of proving non-resident status. Falling away from the financial emigration process:
The new financial emigration process will include inter alia:
Be Careful – Tax Residency is Complex Tax residency in South Africa is determined by two tests, namely the Physical Presence test and the Ordinarily Resident test. Many think that by merely not living in South Africa currently, they are therefore not tax resident of SA. This is an extreme over-simplification and has gotten many in trouble with SARS in the past. Careful consideration of all aspects of both tests must be undertaken on an individual basis with a taxpayer, determining on a balance of probabilities whether they are able to overcome their burden of proving non-residency. One must be cautious when rushing into making this declaration to SARS when this is not truthful, or provable with objective evidence. Even making a mistake these days can land one in hot water, especially after the amendment to the Tax Administration Act which removed the term “wilfully” when handling non-compliance. This amendment has provided SARS with greater clout to hand over taxpayers for prosecution, when claiming negligence or a “mistake”. Being Well Prepared is Key With a new financial emigration regime at play from 1 March 2021, prepare yourself for a tougher and more complex process in proving non-resident status with SARS. Ensure you obtain advice on your resident status from a reputable tax advisory firm which has a strong and diverse legal component to its business. Tax residency is based on the interpretation of law – a legal background is essential in ensuring the correct interpretation of your status and facing off against SARS to prove this. This is normally a process you would want to undertake with a firm which offers international tax expertise, who can cover all aspects of the process as a single solution and who also provide legal privilege which is essential as no part of your personal affairs remain hidden during this process. 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 Budget takes plight of ordinary taxpayers into account, but no compromise on tax collection25/2/2021  In this year’s budget speech, Minister of Finance Tito Mboweni steered a course between providing some relief to beleaguered taxpayers after a challenging year while still trying to stick to the government’s existing fiscal plans, says Thomas Lobban, Legal Manager for Cross-Border Taxation at Tax Consulting South Africa.
“The budget brings relief to individual taxpayers by raising the brackets on personal income tax by 5%, which is above inflation, and proposed tax increases of R40 billion have been scrapped—for the moment at least. At the same time, though, the Minister highlighted a concerted effort to increase SARS’s ability to bring wealthy individuals using complex financial arrangements in concealing assets to book,” he says. “It appears as though the tax authorities are already taking great strides in investigating high-net-worth individuals suspected of non-compliance.” He points out that this approach follows the recommendations of the Davis Tax Committee to strengthen existing methods for obtaining information on and collecting tax from wealthy individuals. The budget makes provision for an extra R3 billion for SARS to expand its technology infrastructure and expand its specialised audit and investigative unit. “This is encouraging for taxpayers who may have felt that SARS was previously concentrating on easy targets or low-hanging fruit,” he argues. Overall, Mr Lobban worries that the budget rests on a somewhat optimistic view of the economy’s potential for growth, with forecasts revised upwards to 3.3% for 2021 and then 1.9% in subsequent years. Growth forecasts have been too optimistic in the past, and if this proves to be the case again, it could undercut the budget. A surprising move was the drop in the corporate tax rate by 1% to 27%, which will definitely be seen as supporting the President’s growth and job-creation agenda. However, says Mr Lobban, this decrease should be treated with circumspection as the Minister also announced that interest deductions and assessed losses would be limited. “The overall impact of these measures needs to be carefully assessed,” he says. As expected, so-called sin taxes on alcohol and tobacco were increased, but the 8% quantum was perhaps higher than most expected. These taxes are frequently seen by finance ministers as soft targets but, says Mr Lobban, the large increase comes on the heels of mammoth losses in both industries during the various lockdowns. “We know from our lockdown experience that consumers are willing to turn to illicit suppliers when they cannot obtain their desired tobacco or alcohol products, and higher prices now might have the unintended consequence of reinforcing that trend—with damaging effects on the fiscus,” he says. “It is to be hoped that SARS’s increased capabilities and funding will be used to bring the illicit trade in alcohol and tobacco into the tax net. “One could argue that the sustained effort to strengthen and expand SARS’s capability to identify even the most sophisticated tax-evasion schemes, and bring defaulters into line, is the biggest story of the day.” 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: Jashwin Baijoo, Legal Manager, Africa Tax and Compliance at Tax Consulting SA
In these uncertain times many small to medium enterprises (SMEs) do not have the financial means to settle large debts which have accrued to the South African Revenue Service (“SARS”), be it in light of the crippling COVID-19 pandemic, or due to long outstanding debts. Between the business restrictions imposed by the spread of COVID-19 and the resultant decline of the South African economy, a large number of SMEs face troubling times ahead. Have you received a Final Demand from SARS? While SARS has spent the past year implementing collection measures more forcibly than ever before, do not think you have escaped its radar. Like all strategic movers, SARS has been biding its time, focusing on the most prevalent debts, and working its way through every non-compliant taxpayer, calculating interest upon interest and imposing penalties across the board, while you have been forced to operate at limited capacity, thinking a reduced revenue stream was your greatest concern. SARS has in recent months, greatly increased the pressure of its collection measures, with a final demand (“the demand”) being sent to the company or its representative taxpayer, for any and all tax liabilities. SARS follow-through has also become more drastic, with the final demand being ignored as previously would, and SARS going straight for the jugular with a 3rd party appointment or Sheriff’s attachment in lieu of the outstanding amount. As a last port of call, the most drastic collection measure, a forced liquidation, may be implemented by SARS. Companies who find themselves in this situation, feeling like they are staring down the barrel of a gun, wondering how they are going to pay this month’s salaries, do have solutions available, but none so favourable as an application for a compromise of tax debt (“the compromise”). This is a cease-fire which SARS has, in recent times, become more amicable toward, showing great compassion for the financially constrained SME. The Appropriate Response If a business has received a letter of demand from SARS in respect of missed PAYE or VAT payments, action must be taken immediately to avoid the tax debt trap. Tax debt, purported or not, will not go away, but will only spiral out of control and drain the life out of the business, until the taxpayer is drowning in debt and has no way of escape. The Solution Given the unpredictable nature of the pandemic and its devastating effect on the country’s economy, companies should not jump straight to the worst-case scenario and commence with liquidation proceedings. This should in essence be any company’s last resort and is positively preventable by means of engaging SARS in compromise negotiations. The First-Mover Advantage In order to protect yourself from SARS, it remains the best strategy that you always ensure compliance. Where you find yourself on the wrong side of SARS, there is a first mover advantage in seeking the appropriate tax advisory assistance, to ensure the necessary steps are taken to protect both yourself and your bank balance from paying the price for what could be the smallest of mistakes. However, where things do go wrong, SARS must be engaged legally, and we generally find them to be agreeable to the utmost where a correct tax strategy is followed. As a rule of thumb, any and all correspondence received from SARS should be immediately addressed, by a qualified tax specialist or tax attorney, which will not only serve to safeguard the taxpayer against SARS implementing collection measures, but the taxpayer will also be correctly advised on the most appropriate solution to ensure their tax compliance. 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: Roxanna Naidoo, Admitted Attorney and Lisa Mihalik, Tax and Legal Administrator at Tax Consulting SA
A new set of tax law amendments, signed by President Cyril Ramaphosa, and promulgated on 20 January 2021 has granted SARS all the legal fire power it needs to impose criminal sanctions on taxpayers who neglect their tax affairs. Criminal Negligence Prior to the promulgation of the Tax Administration Laws Amendment Act, 2020 (Amendment Act) a mistake made by a taxpayer was only a crime when it was done “wilfully and without just cause.” In other words, the law required an element of intent; where negligence or ignorance caused your administrative non-compliance, you would have gotten off with a slap on the wrist. Henceforth, your intention does not matter – where you “negligently” fail to comply or make certain mistakes on your taxes you commit an imprisonable criminal offence. Ignorance, a defence commonly used by taxpayers, will no longer fly – SARS will from now on hold you to a higher standard of care. Strategically speaking, this is a bold, brilliant move from the SARS-Treasury team, as the simple inclusion of the word “negligence”, now allows for the offence criteria to be broadened to such a degree that even the slightest mistake made in one’s compliance could result in criminal prosecution. The 11 Mistakes As the saying goes “we all make mistakes,” but when it comes to mistakes on your taxes each of the 11 mistakes listed in the Amendment Act can result in up to 2 years in prison. So, it is vital that you educate yourself on precisely what they are to remain unmistakably compliant and lawful. What are they?
The Amendment Act just demonstrates that the new SARS Commissioner and the SARS-Treasury team have adopted a complete no-nonsense approach to non-compliance. Given how easily (and how often) these mistakes can happen, and how hard they will be to correct, taxpayers should exercise extreme accuracy and vigilance when filing their taxes. It may serve you well to appoint a qualified tax consultant or experienced tax attorney to ensure you do not end up on the wrong side of these new rules. 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, Legal Manager for Cross-Border Taxation at Tax Consulting SA
With South Africa and the world at large facing an economic downturn as a result of various factors, not the least of which being the Covid-19 pandemic, SARS is on a mission to plug the existing gaps in tax revenue collection and compliance. It is no stretch of the imagination to believe that cryptocurrency must be high on the list of SARS’ compliance concerns, given how it has existed under little-to-no regulation and these transactions are often easily concealed. Indeed, cryptocurrency has been steadily increasing in its popularity as a speculative investment by South Africans and, it appears, is now squarely within SARS’ focus. A Request by SARS When a taxpayer files a tax return, SARS may (in many cases) send a request for verification or “audit request” in which it seeks clarification and / or supporting documentation from a taxpayer. The information sought by SARS is inevitably linked to the disclosures made by the taxpayer in that return. This is a preliminary step taken by SARS in audit proceedings, and it is crucial that a taxpayer prepare themselves accordingly for this ahead of time. Tax Consulting South Africa has recently been approached by taxpayers who were presented with a SARS audit request. These requests posed standard questions as would be expected on the taxpayers’ returns, but also went further to request the following:
While this is certainly a first, it is certainly the kind of approach by SARS that taxpayers should expect moving forward. Playing by the Rules In the first instance, taxpayers should already know that it is a criminal offence where a taxpayer wilfully fails to submit a document or information as requested by SARS or makes a false statement to SARS. It is no longer material whether the taxpayer concerned had justification for such non-disclosure or false statement made. This means that a taxpayer who fails to correctly disclose their cryptocurrency-related income or comply with an audit request by SARS to this effect may be convicted for an offence and be liable to a fine or imprisonment for up to two years. In light of this recent change to our tax laws, it is feasible to understand that SARS is in the process of ensnaring culpable taxpayers who have not disclosed their cryptocurrency-related trading profits and / or losses. While further cryptocurrency regulation is certainly on its way, and with the international Common Reporting Standards now in full swing, audit requests are still a primary weapon in SARS’ arsenal and the walls are closing in on non-compliant cryptocurrency traders. So, when is SARS disclosure required? A misconception often harboured by taxpayers is that they do not owe any tax liability on their cryptocurrency-related income and do not need to make any disclosure to SARS to this effect. This is, unfortunately, not the case. When SARS Disclosure is Required From the outset, it should be known that all cryptocurrency transactions will bring tax consequences for a taxpayer. A tax disclosure obligation does not only arise where a cash balance is withdrawn from a trading platform – all transactions that have been made (whether a transaction of cryptocurrency for money or cryptocurrency for other cryptocurrency) must be disclosed to SARS. Taxpayers should take the time to consider and understand the tax consequences when dealing with cryptocurrency, in order to prevent being caught off guard upon a SARS inquiry to this effect. Any taxpayer who has not disclosed cryptocurrency held or traded should immediately seek professional guidance in getting their tax affairs in order. Alternatively, where you have never bought or sold cryptocurrency previously, it is important to proceed with caution when responding to an audit request. As has been well reported, SARS is well within their rights to compel a taxpayer to respond to an audit request. Failing to disclose any relevant amounts or respond to an audit request correctly could well result in substantial penalties or harsh criminal sanctions. There is little doubt that SARS is pursuing non-compliant cryptocurrency traders, so it is best for these taxpayers to stay ahead of the curve and ensure that their tax affairs in order beforehand. Click here to view the SARS audit request mentioned above. 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  Co-authored by; Bryce Nel, Project liaison officer and Jashwin Baijoo, Legal manager of Africa Tax & compliance at Tax Consulting SA
As 28 February 2021 looms near on the horizon, so too does the deadline for the second provisional tax submissions for 2021. This February will be the most important tax submission to date for expatriates earning above the R1.25million threshold as they will now be exposed to a previously non-existent tax liability in South Africa. Johnnie Kruger, Legal Manager for Africa Desk at Tax Consulting South Africa, says the company has been proactive in working with South African expatriates and their corporate clients affected by this change. Over the past year, Johnnie has been visiting and presenting to South Africans in remote locations in the Democratic Republic of Congo, Zambia, Oman, Qatar, Saudi Arabia, and the UAE. "The change to section 10(1)(o)(ii) of the Income Tax Act has caused a lot of confusion for expatriates working in Africa and abroad on a rotational basis. The vast majority of expatriates are still in a dangerous state of non-compliance with the looming 2021-02 provisional tax filing season.” Requirements to claim the exemption Besides the new cap on income, the requirements to claim an exemption are as follows:
This comes as a huge blow to many expatriates who strived to meet this criteria and were previously granted the full benefit of their efforts. The introduction of the R1.25 million threshold means that expatriates need to register as provisional taxpayers if their income exceeds this amount or generate income from more than one stream. Kruger says these changes have added to the confusion among rotational workers in Africa because the process has become more complex. “Expats working abroad will now be required to disclose their foreign income to SARS through the filing of two provisional tax returns, as well as the usual annual tax return every year. An expatriate will therefore need to fulfil three filing obligations within each tax period or face the risk of working abroad under a non-compliant status.” Calculating the provisional tax of expatriates With the closing of the first tax period post-amendment only weeks away, the first provisional filing should have been completed by 31 August 2020, with the payment ready to be made to SARS. Tax Consulting uses the information that clients have made available from the first six months of the year to calculate the value of this return and forecast what they believe to be a true extrapolation for the last six months. "The second provisional tax submission is our opportunity to correct any previous inaccuracies that may have arisen from the need to forecast the entire year based on income earned in the first six months. While the process is slightly more complicated, the main issue I foresee is the large number of expats who are yet to register as provisional taxpayers, which is now urgent.” The amendment has led many South Africans to believe that working abroad is no longer lucrative, but Kruger says there are ways to make it work. “When it comes to tax filing, it is crucial for expatriates to hire the most knowledgeable tax consultants. The fiscal environment for expatriates continues to change. It is possible to ensure you aren’t paying more tax than you are legally obligated to pay and that you are meeting all the government's requirements. Tax Consulting is available to assist expatriates looking to get a handle on their tax compliance for 2021,” concludes Kruger. 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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