 South Africans living or working abroad can no longer avoid the long arm of SARS. Under pressure to meet its revenue quotas, the tax authority has started auditing the country’s non-compliant expatriates in earnest.
“We have been warning expatriates that this was coming and now that it’s here, the time for hiding one’s head in the sand is over,” says Jonty Leon, Legal Manager (Expatriate Tax) at Tax Consulting SA. He advises those intending to relocate to another country to follow the formal exit procedures and, most importantly, ensure their tax affairs are in order beforehand. He also advises that those that have already left permanently, should ensure that they have done so in a compliant manner, and have had themselves noted as non-resident for tax purposes. Gone, but not forgotten Whether a South African must declare their worldwide income and pay tax on it to SARS is determined by their tax residency status, not their physical location or period outside the country. Leon states, “Tax residency of South Africa is not determined solely on the amount of time spent in the Republic, this is a far more complex issue which must be technically dealt with in terms of the law.” The safest route to remove ambiguity on tax residency status is to follow the formal financial emigration process. This process is being changed and a new more stringent regime will be implemented from 1 March 2021. This may come as a shock to those who believe that, once they set foot on foreign soil, they are free from any further tax obligation to South Africa. More so for those who left the country without settling their tax debt, even if they have been gone for decades. “With stricter legislation to back its efforts and an emerging system of global financial data sharing as wind in its sails, SARS is more than capable of detecting taxpayers who historically flew under its radar,” says Leon. The warning signs According to Leon, several warning signs arose over the past year. The first was changes to the expatriate tax laws that came into effect on 1 March 2020, soon after SARS launched its dedicated Foreign Employment Unit, which is focused on South Africans working abroad. The second warning was the announcement that the current financial emigration law would be amended, which in the past has been successful in confirming with SARS and SARB one’s non-resident status. The change will inherently make it more difficult to cease tax residency and with a new and, as yet, undisclosed replacement process on the horizon, there has been a massive influx of applications to beat the deadline. The third sign was the removal of the term “wilfully” from the Tax Administration Act when dealing with non-compliance, giving SARS greater leverage to prosecute anyone claiming negligence when failing to meet their tax obligations. This is in line with the reasoning for the change in the expatriate tax legislation previously, where the rife tax non-compliance of South Africans abroad was noted during Parliamentary sessions in August 2017. Lastly, SARS has begun a two-pronged attack strategy: - Firstly, through audits calling for individual expatriates to prove they are non-residents and justify their intentions – some audits calling for proof that the taxpayer had obtained an Emigration Tax Clearance Certificate when leaving South Africa; and - Secondly, by audits on offshore income revealed through the common reporting standard (CRS). According to Leon, this comes as no surprise, as SARS is targeting those who have historically been able to “hide” assets and funds, but which will no longer be possible due to the exchange of information between jurisdictions. Options Leon says South African expatriates and those wishing to emigrate still have several options available to them. For one, they can urgently apply for financial emigration until March 2021. “National Treasury confirmed that applications submitted prior to that date will be processed under current legislation,” he says. They can also take advantage of any double tax agreement between their chosen country and South Africa. As the tax implications of such agreements vary between jurisdictions and the fact that these agreements do not apply automatically to the taxpayer, they should seek advice from an expatriate tax expert. Above all, if an expatriate is not tax compliant, they can approach SARS under the Voluntary Disclosure Programme to pay their back taxes along with interest and penalties but without prosecution. This process must also be undertaken very carefully, as specific requirements must be met. “SARS has the advantage now, so waiting to see what happens is a course of action I do not recommend,” says Leon. 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 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  On 8 December 2020, the Pretoria High Court ordered that SARS refund Ferrari Logistics more than R1 million, including interest, it collected without cause from the company’s bank account in October and November 2020.
Jean-Louis Nel of Tax Consulting SA, says the case illustrates the importance of engaging an expert in tax law, court proceedings and SARS legal processes. “While tax advisors are typically competent to service their clients’ general tax needs, both the taxpayer and the advisor should ensure their tax compliance regime includes a strong tax legal partner,” he says. This guarantees similar unwarranted actions are met with the immediate legal response required and expected by the court when considering if the matter should be heard on an urgent basis. The matter Tax Consulting SA was approached by Legal Professional Accounting Consultants, the tax advisor to Ferrari Logistics (Pty) Ltd, to provide legal assistance to the large multinational organisation. In October 2020, SARS appointed Ferrari Logistics’ bank, FNB, as a third-party agent to collect a substantial sum SARS deemed to be due from the company’s account. SARS has the right to make such appointments in terms of Section 179 of the Tax Administration Act. However, when applied improperly, it is imperative that the affected taxpayer understands their legal rights and responds proactively. Ferrari Logistics had not received a letter of demand from SARS as prescribed by the Act and was in fact tax compliant with no outstanding tax debt due to SARS. Tax Consulting SA promptly gave notice to SARS that if it did not refund the amount, the taxpayer would approach the High Court for relief. Despite this, SARS collected further funds, nearly draining Ferrari Logistics’ bank account. This had a significant impact on the business’s cash flow and its ability to pay employee salaries. The taxpayer had no alternative but to launch an urgent application against SARS in the Pretoria High Court to set aside the third-party appointment and to claim a refund of the full amount together with interest and costs. Ultimately, the court granted an order in favour of the taxpayer. “Without specialised legal guidance, Ferrari Logistics could have waited over eight months for the case to be heard, and even longer under COVID-19 constraints,” says Nel. He commends Legal Professional Accounting Consultants for promptly seeking professional council for their client. According to Nel, this was the fourth matter of its nature being heard by the Pretoria High Court alone this year. Rapid response team Taxpayers who delay taking decisive action risk undermining the merits of their own urgent application before the High Court. Tax Consulting SA advises organisations and their tax advisors to work in a cooperative manner with SARS when dealing with regular tax affairs. However, when matters arise that infringe on the taxpayer’s rights, they should engage legal professionals without delay. Nel says the best approach is to have a rapid response team on call that comprises the taxpayer’s internal tax function, the tax advisor and a solid legal partner. “Don’t overlook the legal component,” he advises. “Immediate direction on the best and fastest route through complex tax laws, court proceedings and SARS legal processes is critical in ensuring a taxpayer recovers quickly from any similar tax crisis.” 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: Jean du Toit, Attorney and Head of Tax Technical at Tax Consulting South Africa
1 March 2021 marks a watershed for retirement funds in South Africa. Most are focussed on the annuitisation rules that have been pending since 1 March 2015, otherwise known as “T-day”. While these reforms are significant, retirement fund members need to understand them in the grand scheme of things. T-day reforms Back in 2013, the then Minister of Finance, Pravin Gordhan, tabled proposals directed at the governance, preservation, annuitisation and harmonisation of retirement funds. Initially, T-day was earmarked for 1 March 2015, but was postponed as a result of ongoing “consultations” with stakeholders. Many will be aware that from 1 March 2021, members of retirement funds will be subject to the annuitisation rules, which means that they will only be able to withdraw one-third of the value of their retirement fund by way of a lump sum, where the balance must be withdrawn as an annuity. The annuitisation rules do not apply where the retirement interest does not exceed R247,500, or to amounts contributed on or after 1 March 2021. Withdrawal on emigration Currently, members of retirement funds can immediately access their funds in a preservation or retirement annuity fund when they emigrate from South Africa, if such emigration is recognised by the SARB. In terms of the latest Taxation Laws Amendment Bill, from 1 March 2021, withdrawal will only be permitted if the member can prove they have been non-resident for tax purposes for an uninterrupted period of three years. This means an effective three-year lock-in of retirement funds from the effective date. Importantly, for those who plan on leaving in the near future, in terms of National Treasury’s response to public comments on the amendment, members will be allowed to withdraw their funds under the current dispensation if they file a complete application before 1 March 2021. Prescribed assets The ongoing whispers of “prescribed assets”, where the government effectively wants to unlock retirement funding for investment in government projects have made South Africans very anxious. The government’s main hurdle in implementing this policy is Regulation 28 under the Pension Funds Act No. 24 of 1956. Regulation 28 would have to be amended to effect this policy, as it requires a fund to act in the best interest of its members. The ANC’s stance on this has not been consistent, but the latest hereon can be drawn from the Medium Term Budget Policy Statement where the Minister of Finance said that “Government has initiated a process to review Regulation 28 to make it easier for retirement funds to increase investment in infrastructure - should their board of trustees opt to do so.” He further noted that a draft gazette will be published in due course for public comment, so it seems that this policy will be implemented in some shape or form. Rules that remain unchanged (for now) It is important to understand that the annuitisation rules are largely directed at aligning retirement funds with respect to annuitisation; but this should not be conflated with the idea of compulsory preservation. For example, currently, you are permitted to take your full withdrawal benefits from your pension fund in cash upon termination of your employment. Some may understand the new rules to mean that this would no longer be possible, but this is not the case – this rule remains intact – for now. More changes coming Further to his comments on Regulation 28, the Minister of Finance also said that “Government will present legislation next year to allow for limited pre-retirement withdrawals under certain circumstances linked to mandatory preservation requirements.” National Treasury mentioned this policy will allow access to retirement funds during times of crisis, but mandatory preservation, which was part of the agenda initially, looks like it will be part of the equation. While changes are implemented progressively, fund members should keep their ears to the ground, as the government’s policy on retirement funds appears to be a moving target. 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
The hotly debated amendment to Section 10(1)(o)(ii) or “Expatriate Exemption” took effect from 1 March 2020, with the questions on many expatriates’ minds often being “how will SARS find me? What does the SARS audit of an expatriate look like and what questions should I expect?” Anyone who has been sharply following the SARS expatriate tax law change will know that expatriates are being earmarked for aggressive targeting. They would also know SARS started a dedicated “Foreign Employment” unit to execute on this mandate, but what happens when you are on their radar and the audit commences? The evidence On an audit request dated 02 November 2020 from SARS, the following questions/requests were posed to the expatriate filing the return:
Unfortunately, expatriates were forewarned on being compliant, and with SARS’ recent inclusion of the words “wilfully or negligently” in the Tax Administration Act, one cannot take these questions lightly when responding nor plead ignorance after the fact; the consequence of which include imprisonment or a hefty fine. Onus remains on the taxpayer What remains important is that, if you are claiming non-resident tax status of South Africa –
Those who have left their situations to chance or “fly-by-night” advice will unfortunately need to deal with the consequences. Many think that as they have not heard anything from SARS yet, that they have managed to keep themselves hidden. However, SARS is only starting to “warm-up” in its collection duties from South Africans earning foreign income, who have legitimately been a softer target due to rife non-compliance in the past, and which makes it even easier for SARS to raise an audit. Simply put, formalise your tax residency status with SARS or get ready to deal with a tougher SARS going forward. 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  Authored by: Roxanna Naidoo, Admitted Attorney at Tax Consulting South Africa.
While the country was under lockdown, it appears SARS and National Treasury have been hard at work, using this time to refine the law in SARS’ favour. These changes do not refer to the Covid-19 tax relief changes but are aimed at closing tax loopholes and to simply give SARS and the National Prosecuting Authority more teeth. Ask your accountant or tax advisor to help you understand the amendments and their impact on your tax planning and tax compliance strategy. 1. Raising of tax assessments by SARS simply using an estimate SARS has had enough of taxpayers ducking and diving from their tax administration obligations. In terms of the new amendment, SARS has the power to raise an estimated assessment where the taxpayer does not respond to a request from SARS for relevant material, but this has been thought through carefully. The law amendment also now ensures that taxpayers will be barred from lodging an objection if the taxpayer does not submit the material requested. Should SARS have you on their radar or have questions subsequent to a lifestyle audit, ignoring a request for relevant material means SARS can raise an estimated assessment and impose penalties and interest. Getting untangled from this, even where you are innocent, will become far more difficult. Make sure you take your accountant’s calls or respond to their emails, as adopting the ostrich approach will get you into deep trouble. 2. Employer provided bursaries Are you an employer who has tax structured bursaries, including for relatives of your employees? Or perhaps an employee who has benefitted hereon in the past? The law on this has been amended substantially and from 1 March 2021, using employer-provided bursaries as a mechanism to structure your remuneration from a tax perspective is no longer allowed. These bursaries must be disclosed on your IRP certificate, and not doing so is a criminal offense. Thus, there is no place to hide hereon and this is truly something of the past. There are now very limited instances where this tax exemption can be utilised, as part of a tax optimal total reward strategy. 3. Withdrawal from retirement funds upon emigration Have you emigrated or are you planning to emigrate from South Africa in the near future, with retirement funding in a pension preservation fund, provident preservation fund or retirement annuity fund? You are on borrowed time if this is the case and you need to urgently finalise and file your financial emigration application, before 1 March 2021. If you miss this deadline, your retirement funds will be locked-in for at least the next 3 years in South Africa. We also expect more to come from the compulsory preservation of retirement funds, meaning the government may have the final say on how your retirement funds will be dealt with in future. 4. First good news item – unexpected tax relief for South Africans working abroad Many expats were concerned that they would not make the 183-and-61 day tax exemption, as a result of the lockdown. SARS has kindly proposed to reduce, for a limited period, the 183 days requirement to 117 days. This rule change creates interesting tax planning opportunities and requires a deeper look for anyone who was outside South Africa for more than 60 days continuously in 2019 or 2020. 5. Living Annuities and termination of trusts The era of setting up personal trusts left right and centre has come to an end with the introduction of section 7C. There are still instances where old trusts make sense and limited instances where one’s objective is asset protection. But if you think that creating a new trust will benefit you, perhaps you should get a second opinion from your accountant. You may sound important over dinner referring to your trust or even prevent your children from fighting over who gets the beach house, although inevitably they often still do. But do not think for a second you will pay less tax, as the opposite is true. Where you have a trust with a living annuity, you need to be aware of the new law changes when considering the death of an annuitant. 6. Circumvention of the anti-avoidance rules for trusts SARS has now amended the legislation in order to curb the abuse of the introduction of low interest or interest-free loans, advances or credits for trusts. Just to rub salt in the wounds of those who still persist in thinking trust structures are tax-efficient, SARS has now shown that you need to stop listening to trust advisors who keep trying to find the next loophole. As SARS sees it, they will close it, leaving you with an overly complex trust structure that needs untangling. 7. Reimbursing employees for business travel SARS has kindly relaxed their strict regulations when excluding business travel expenses. This is, however, subject to the employer’s policy provisions. Make sure your company travel policy is updated to utilise this tax relief. This is very much part of the equal pay for equal work value methodology for responsible employers where employees were left with little recourse regarding these tax burdens due to an oversight or the employer’s failure to execute the instruction for reimbursement. 8. Roll over of amounts claimable under the employment tax incentive Excesses of Employment Tax Incentive claims for non-compliant tax employers will now not be rolled over at the end of the PAYE reconciliation period. This is to protect taxpayers once they do become compliant. 9. Tax treatment of secured non IFRS 9 doubtful debt If you own a business that has been negatively affected by Covid-19, you need to talk with your accountant regarding this change. SARS proposes to make provision for the amount of debt to be reduced, differentiating between taxpayers that apply IFRS9 and taxpayers that do not. 10. Potential tax avoidance caused by dividends deductions Taxpayers were able to structure their investments in order to issue financial instruments to the investors that yield dividends, while it receives interest or other income on its financial assets, thus avoiding tax implications. The new amendments now mean that taxpayers will no longer have the advantage of this loophole. 11. Refund need not be authorised where the matter is under criminal investigation The proposed amendments further include that where you are subject to a criminal investigation in terms of the Tax Administration Act, any refund owed to you by SARS will be withheld pending the outcome of such investigation. We can only hope this will not be abused by SARS officials, as we stand reminded by the fact that the Tax Ombud has found SARS guilty of delay tactics in paying refunds. 12. The most critical tax law change! Inclusion of the words “Wilfully or negligently” in tax prosecution Getting an admitted tax attorney involved on your taxes ensures legal privilege. SARS’ seemingly harmless inclusion of the words “willfully and negligently” when it comes to lesser tax offences increases liability for non-compliant taxpayers, with prosecution resulting in imprisonment or a hefty fine. By not simply updating your details, forgetting to do something, or making an unintended error can now land you in real trouble. Perhaps now is the time to take your tax administration and compliance extremely seriously, as SARS has just acquired its biggest ammunition yet to discourage 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  “There’s only one remuneration model employers should be considering during COVID-19,” says Tanya Tosen, Tax and Remuneration Specialist at Tax Consulting South Africa.
What a company is prepared to pay its workers has always been a juggling act between three main considerations. These are: attracting, retaining and motivating talented employees; being fair; and keeping total remuneration costs from spiralling. According to Tosen, there is, in fact, a structure that offers a critical balance between all these needs. The contenders There are two main remuneration models that employers use throughout South Africa with a third being a hybrid of the second model. The first is Basic Plus which, as the name suggests, starts with the basic salary and adds benefit contributions to determine the total cost of the employee. The second is Cost to Company. This begins with the total cost the employer is willing to pay and reduces that amount by benefit contributions to arrive at the employee’s net income. The third is Cost to Company with Flexible Benefits. This model is similar to Cost to Company in that the total cost is fixed. However, it allows employees to adjust their contributions to individual benefits, with any remainder flowing back into their basic salary. Pros and cons Although Basic Plus is still used, it has a major flaw in that an employee’s total remuneration cost is not capped and therefore unpredictably variable. Consequently, this makes it difficult to pin down what the company’s overall staff expenditure is at any point in time. For example, if benefit rates unexpectedly increase, the total cost of all employees increases too, with the employer bearing the brunt. Similarly, projecting future staffing costs is uncertain at best. On the other side of the coin is Cost to Company. Because the total cost of every employee is capped, it becomes easy to report on remuneration costs and project staffing budgets. However, in this model, benefits are generally rigid and an unexpected increase in rates negatively impacts the worker’s take home pay. This calls into question its motivational efficacy and fairness to staff. The Cost to Company with Flexible Benefits model offers the best of both worlds and, in a COVID-19 stricken economy, is just what the doctor ordered. The employer still retains the certainty of a fixed total cost to company, and can just as easily report on and project its company wide staffing costs. At the same time, employees can manage their own contributions. This means they are not paying for benefits they don’t need in their current phase of life and can take advantage of those they do. Any remainder becomes part of their take home pay. “This is especially important to those who are facing salary cuts right now and wish to free up cash to meet their financial obligations,” says Tosen. Its balance between motivation, fairness and control clearly makes Cost to Company with Flexible Benefits the winning model during and after the pandemic. Switching Tosen says that, in the COVID-19 era, more companies are moving to a Cost to Company with Flexible Benefits remuneration model. She strongly advises employers to consider switching and to seek the assistance of a reputable remuneration consultant to ensure a smooth transition. “Those who adopt it will enjoy the same benefits as the legacy Cost to Company structure while offering the flexibility and assurance employees need at this time to remain productive,” she concludes. ENDS MEDIA CONTACT: Rosa-Mari Le Roux, 060 995 6277, rosa-mari@atthatpoint.co.za, www.atthatpoint.co.za ABOUT Tax Consulting SA: Tax Consulting SA offers a streamlined service in the calculation and filing of individual income tax returns, provisional income tax returns or any other more complex individual tax relate matters. Our highly qualified team of Tax practitioners are registered with SARS under controlling body of the South African Institute of Tax Practitioners (SAIT). As tax specialists, we remove the burden from clients to keep their tax affairs in good order, achieving optimal tax savings while ensuring full compliance. For more information on Tax Consulting please visit: Website: http://www.taxconsulting.co.za/ LinkedIn: Tax Consulting South Africa Facebook:Tax Consulting South Africa Taxation Laws Amendment Bill Provides Relief for South African Expats “Trapped” During Lockdown9/11/2020  Authored by: Jonty Leon, Attorney & Legal Manager for Expatriate Tax Compliance at Tax Consulting SA
On 13 October 2020, National Treasury and SARS published their responses on the Draft Taxation Laws Amendment Bill (“TLAB”), which included potential relief for South African expatriates who were unable to leave South Africa owing to the Covid-19 lockdown. This relief provided for reduced days in terms of the requirements of the foreign employment exemption, being section 10(1)(o)(ii) of the Income Tax Act, commonly known as the “expat exemption”. As this was merely a response document, which needs approval by the Minister and Parliament, the relief has not yet been confirmed. It is commonly known that SA is in dire need of tax revenue, and this proposal thus came as a welcome surprise, with many anxious to see whether this would pass into law and provide much needed relief for expats. One Step Closer On 28 October 2020, an updated TLAB was released following the response document by Treasury and SARS, which included the proposed relief for expats. As the proposals were contained in the TLAB, it takes a step in the right direction for the relief to be approved in Parliament and promulgated into law, which ordinarily would materialize in December, if prior years are anything to go by. At this point, it would be out of the ordinary for the proposal to not be passed and thus this is positive news for South African expats who have been locked down in SA and unable to meet the standard days out of SA to claim the exemption. One word of caution would be to not count one’s chickens before they have hatched – although moving in the right direction on this proposal, a flailing economy could give rise to an unexpected surprise. The Relief The foreign employment exemption standard requirements are simply: - Income must emanate from foreign employment (independent contractors do not qualify); - The taxpayer must spend more than 183 days outside South Africa during a twelve-month period; and - More than 60 of those days must be continuous. If these requirements are all met, R1.25mil of foreign earned income can be exempted from tax in South Africa – the portion above this, simply put, would remain taxable in SA in terms of the standard personal income tax rates. The proposed relief reduces the total number of days required to be outside of SA by 66. Thus, the only change to the exemption requirements is that the taxpayer would need to be outside of SA for more than 117 days rather than 183 days. Be Cautious – Approach SARS with Clean Hands Many South African expats will breathe a sigh of relief, if this proposal is signed into law. The issue arises though that many are of the opinion that if they meet the exemption requirements, they are automatically exempt from tax in SA. This is incorrect – one must file a tax return to SARS, declaring their foreign income and claiming the exemption for that income from tax of up to R1.25mil. Without doing this, the foreign income is theoretically not exempted from tax in SA, unless you have already formalised your non-tax residency using the Financial Emigration process or by applying Double Tax Treaty relief. Furthermore, dealing with thousands of expatriate tax returns yearly, we note that in most cases taxpayers have been historically non-compliant, as they have not declared their foreign income. This historic non-compliance must be fixed, especially where a taxpayer only now decides to declare income correctly, and preferably with a tax professional at your side to mitigate any tax exposures. The crux of the matter is that SARS is under massive pressure to extract as much tax revenue as possible from a dwindling tax base. Non-compliant taxpayers make it easy for SARS not only to raise an assessment requiring tax to be paid, but also to levy penalties and interest on previous non-declaration. ENDS MEDIA CONTACT: Rosa-Mari Le Roux, 060 995 6277, rosa-mari@atthatpoint.co.za, www.atthatpoint.co.za ABOUT Tax Consulting SA: Tax Consulting SA offers a streamlined service in the calculation and filing of individual income tax returns, provisional income tax returns or any other more complex individual tax relate matters. Our highly qualified team of Tax practitioners are registered with SARS under controlling body of the South African Institute of Tax Practitioners (SAIT). As tax specialists, we remove the burden from clients to keep their tax affairs in good order, achieving optimal tax savings while ensuring full compliance. For more information on Tax Consulting please visit: Website: http://www.taxconsulting.co.za/ LinkedIn: Tax Consulting South Africa Facebook:Tax Consulting South Africa  Authored by: Jean du Toit, Jean du Toit, Attorney and Head of Tax Technical at Tax Consulting South Africa
When engaging in disputes with the taxman, there are many rules you need to be aware of, but the decision in CSARS v The Executor of the Estate of Late Ndlovu (A395/2016) arguably tells the most important. This decision by a full bench of the Pretoria High Court reveals how high the stakes are when you submit an objection against an assessment issued by SARS – because any items you omit at this point will be considered bygones. The decision The dispute between SARS and the taxpayer in this case revolved around the taxation of shares granted to the taxpayer by the Nedbank Group. Importantly, in addition to the tax levied, SARS imposed interest in terms of section 89quat(2)of the Income Tax Act. In disputing the assessment in question, the taxpayer did not object or appeal against the imposition of the interest and this was only raised during an Alternative Dispute Resolution meeting that followed his notice of appeal. The matter progressed to the Tax Court where, among others, it had to be decided whether the taxpayer may raise a new ground of dispute that was not included in his objection i.e. the imposition of the interest. The tax Court held there was no prejudice to SARS and the new ground may be introduced. SARS took the matter on appeal to the High Court, where the full bench had to decide if the Tax Court’s decision ought to be upheld. On the question of raising new grounds not included in the objection, the court referred to the following principle established by the Supreme Court of Appeal in CSARS v Brummeria Renaissance (Pty) Ltd and Other 2007 (6) SA 601 (SCA): “…But it is also in the public interest that disputes should come to an end… it would be unfair to an honest taxpayer if the Commissioner were to be allowed to continue to change the basis upon which the taxpayer were assessed until the Commissioner got it right…” But what is good for the Commissioner is good for the taxpayer – the court overturned the Tax Court’s decision and held that taxpayers cannot change the basis of their dispute if this was not raised in their objection. Take away We are often approached by taxpayers only once their dispute with SARS has gone awry; often when it has progressed beyond the objection stage. It soon becomes evident that the taxpayer or their representative failed to address certain pertinent aspects in the objection, which makes it very difficult to salvage what may have appeared to be a very simple matter. Vague and ill-informed objections can result in very serious ramifications for the taxpayer, even where they may have been assessed incorrectly. Practically, you should see your objection as your only shot to dispute an assessment and even in the most uncomplicated of disputes, taxpayers are advised to call on a professional who will make your shot count. ENDS MEDIA CONTACT: Rosa-Mari Le Roux, 060 995 6277, rosa-mari@atthatpoint.co.za, www.atthatpoint.co.za ABOUT Tax Consulting SA: Tax Consulting SA offers a streamlined service in the calculation and filing of individual income tax returns, provisional income tax returns or any other more complex individual tax relate matters. Our highly qualified team of Tax practitioners are registered with SARS under controlling body of the South African Institute of Tax Practitioners (SAIT). As tax specialists, we remove the burden from clients to keep their tax affairs in good order, achieving optimal tax savings while ensuring full compliance. For more information on Tax Consulting please visit: Website: http://www.taxconsulting.co.za/ LinkedIn: Tax Consulting South Africa Facebook:Tax Consulting South Africa |
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