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

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?

1. Failure to register your details with SARS or to notify them of any changes to your details;
2. Failure to appoint a representative taxpayer or to notify SARS of such appointment or a change in representative taxpayer;
3. You receive compensation for assisting someone with their taxes and you fail to register with SARS as a tax practitioner;
4. Failure to submit a return when required to do so;
5. Failure to retain all relevant substantiating records; 
6. Failure to provide any information as and when requested by SARS to do so;
7. Failure to appear and comply when you are requested by SARS to attend a meeting or a hearing in order to give evidence;
8. You are issued with a directive or instruction by SARS and you fail to comply with it;
9. You fail to disclose any material information to SARS or you fail to provide SARS with any notification as required under any tax Act;
10. You are notified by SARS to pay an amount on another taxpayer’s behalf in settlement of a tax debt and you fail to do so; or
11. You have a withholding obligation and you fail to withhold or deduct the tax correctly and pay it over to SARS.

The only way to avoid a mistake is to not make it
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:

• The purpose for which the taxpayers purchased cryptocurrency; and
• A letter from the trading platform(s) confirming the investments and the relevant trading schedules for the period and bank statements.

This would have been reasonably expected by the taxpayers, if they had made any disclosure of cryptocurrency-linked trading amounts in their returns, along with the rental amounts and certain investments that were indeed disclosed to SARS. However, in this case, we had explicitly confirmed that the taxpayers had not, to their knowledge, ever effected a cryptocurrency-related transaction.

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