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

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
​

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

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
​

Africa is a rapidly developing market with massive growth being seen across numerous sectors of business in the last few years. From the perspective of a Multinational Enterprise (“MNE”), breaking into the African market can be seen as one of the most lucrative business opportunities, with returns in a developing market being notably higher than those in existing or saturated markets. With the opportunity to increase revenue tenfold, it’s no wonder that many MNEs wish to expand their footprint across the continent.

“However, Africa’s unique regional profiles, cultural protocols and legislative diversity means that partnering with a resource-rich legal and tax expert is a key component to success,” says Jashwin Baijoo, Legal Manager, Africa Tax and Compliance at Tax Consulting South Africa.

He advises that there are certain vital traits that an MNE must insist on in their partner, to ensure their success in navigating Africa.

Extensive experience
In a continent as unique as Africa, with its rich and varied perspectives on business and diplomacy, it is essential to have the right partner. An experienced partner understands how to best navigate its divergent leadership styles, legal structures, and cultural values. To a company wanting to launch operations efficiently and successfully, this kind of insight is invaluable to its progress. Those who set-out unprepared may find themselves facing many intangible barriers to entry, which can only be overcome with the know-how that comes from experience.

Continental network
Companies coming to Africa for the first time need to establish trusted relationships with and between many different parties and agents in their target countries. Starting from scratch can result in years of lost opportunities, but an exceptional partner brings pre-existing alliances to the table. For an eager MNE, with no time to waste, it’s a requirement they cannot afford to overlook.

In-country expertise
A cross-border network is only as good as the quality of the in-country agents who anchor it in their region. A great partner doesn’t just offer high-calibre legal and tax services in their own right but has replicated their excellence at all operational touchpoints. Getting this formula right takes time, energy, and resources, which is exactly what MNEs are trying to save.

Strong leadership team
A cohesive leadership team is the driving force that pushes an expansion campaign forward. The right partner exhibits a client-first approach to strategic decision-making and assesses localised progress on that basis. Whether it’s a simple tax return for an expatriate employee, restructuring an entire payroll, incorporating a new entity in-country, or providing company secretarial services, a strong leadership team aligns their execution with their client’s desired outcomes.

Centralised command
Ultimately, MNEs moving into Africa want to achieve command-and-control as quickly as possible. And this is what the ideal legal and tax partner provides: a single point of access to a wide array of local and remote resources not otherwise immediately available to their client. That should include both advisory and technical services they can leverage to achieve their goals.

Conclusion
MNEs wishing to expand their presence across Africa do better when delegating to a legal and tax partner with a time-tested, continent-wide network of in-country experts. This ensures the MNE’s corporate strategy remains centralized, and efficiently coordinated throughout the process, saving the MNE precious time and money.

“Most importantly, through such an agent, the MNE gains total command of their expansion and that accelerates their time to launch, as well as the stability of the entire rollout,” says Baijoo.

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

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

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