Authored by: Jean du Toit, Senior Attorney at Tax Consulting SA

The President has entrusted Edward Kieswetter as the new Commissioner for the South African Revenue Service.
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Boasting a stately CV and with an impressive track record, the Commissioner certainly looks to be the right man for the job under normal circumstances.

But these are extraordinary times and the increasing question being asked by compliant South African taxpayers are why we should pay our taxes when SARS have in the past clearly not been doing their job.

South Africans are already grateful to the Zondo Commission on State Capture Inquiry, where the quality of Deputy Chief Justice Zondo as Chairman and the evidence leaders have made short work in exposing absolute blatant tax evasion, seemingly going on for much longer than just the past 4 years.

We now know that the SARS media statements claiming that they cannot comment on taxpayer information are just an excuse for nothing to be done.

What are some of the key challenges the new Commissioner will face?

Game of Chess
Where you have been non-compliant on your taxes, you can still do a SARS Voluntary Disclosure Program (“VDP”) which waives penalties, but critically also prohibits SARS or the NPA from prosecuting.

Dealing with the SARS VDP team on a near daily basis, we can attest that this is not a process which should be taken on where you do not have the correct legal expertise.

However, where done correctly, you are fully protected and your sins of the past will be forgiven under law.

But there is a catch. A valid VDP can only be submitted where you are not being audited, which means we have a game of chess on our hands.

The general rule of thumb is that where you have an ounce of wisdom, you will immediately submit a VDP, which in our experience makes a subsequent SARS audit very difficult.

Or will the Commissioner issue audit notices to everyone as they are named in the Zondo Commission, to prohibit them from applying for VDP and face the full might of the law?

We may have a case of first mover advantage.

Make the Accountant Sing
The mafia was broken by getting their accountant to testify.

For Bosasa, it may very well be their tax advisor, Peet Venter, who critically is not an admitted attorney and thus offers no legal privilege for his client.

Some cats he set amongst the pigeons with allegations he made;
• Bosasa artificially increased its expenditure for tax purposes by using a dormant company, Miotto Trading and Advisory Services (“Miotto”) and Tax Risk Management Services (“TRM”). Peet Venter testified that TRM is directly associated with a tax litigator, Dr Daniel Erasmus. On Peet Venter’s version, he seemed to imply the whole arrangement was one big fraudulent tax affair. We expect that the directors of the implicated companies and Dr Erasmus will want to set the record straight before the Zondo Commission.

• Payments to various beneficiaries were made from Bosasa, including payments toward Mr Hlaudi Motsoeneng’s legal bills and to Mr Andile Ramaphosa’s Foundation, amongst others. The Commissioner will no doubt be interested in whether donations’ tax declarations and / or payment of personal taxes where made hereon, depending on the true nature of these payments.

• Mr Venter testified that he was instructed that he must handle the annual tax returns of the Bosasa directors, as well as that of Messrs Patrick Gillingham and Linda Mti. In the Tax Court case of ABC (Pty) Ltd v CSARS (IT13775), the rules were spelled out when personal tax services provided to employees constitutes a taxable fringe benefit. It would be amusing if there was tax compliance hereon, in context of the other alleged infringements.

• Mr Venter was instructed to alter Mr Louis Passano’s (sequestrated Chief Financial Officer of Bosasa) payslip to reflect a reduced salary of R90,000, as opposed to his full cost to company of R135,000. The balance he alleged was paid by Mr Gavin Watson in cash, ostensibly to hoodwink Mr Passano’s creditors. This raises a myriad of tax compliance questions.

SARS Resources – Asset or Liability?
The Commissioner has two enemies to overcome on high profile and complex investigations -

• Mr Venter testified that when it became apparent that Mr Watson’s associates would tell on him at the Inquiry, he informed Mr Venter that he knows a gentleman at SARS by the name of Gorbi who would assist in making any troubles with SARS go away. We note that failure by SARS to make quick work of those implicated in tax evasion at Bosasa (we have seen no arrests) may give some semblance of truth to a purported backdoor at SARS.

• It takes a rare breed of tax auditor to properly unravel complex tax matters. This will require a team of investigators, who are given the space and mandate to throw the book at those implicated. There is no time to start recruiting now and outsourcing hereof is not an option. The Commissioner will have to search his ranks for a well-resourced team that can go to war.

Section 50 – A Secret Weapon?
Section 50 of the Tax Administration Act creates a legislative provision for an “Inquiry” whereby a judge gets appointed to preside in getting to the bottom of instances of tax non-compliance.

This is a very powerful provision, but rarely used by SARS. The Commissioner may decide to invoke this section to hold an inquiry into those implicated under state capture.

Everyone implicated will then be able to state their case before the judge, as Venter hardly makes an exemplary witness, and one of the principles of legality is to always let both sides be heard.

More importantly, this will contribute greatly in both restoring public trust as well as a much-needed reminder that getting on the wrong side of SARS is not worth the risk.

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, Senior Tax Attorney at Tax Consulting SA 

For those who have been subjected to a SARS audit, it may be hard to imagine a reality where this experience can be any more agonising.

If this resonates with you, perhaps consider a world where SARS makes you pay for the resources it had to expend in putting you through this ordeal. The truth is, it can.

The Supreme Court of Appeal (SCA) in the recent matter of Purlish Holdings (Pty) Ltd v The Commissioner for the South African Revenue Service (76/18) [2019] ZASCA 04 confirmed that taxpayers may be held to account for the additional time and human capital employed by SARS when it conducts an audit. 

Facts
During the 2011 to 2014 tax periods, the taxpayer in question paid provisional income tax to SARS. Subsequently, the taxpayer filed returns for these periods that stated that it earned no income, resulting in a refund due by SARS.

This prompted SARS to audit the taxpayer, which revealed that the taxpayer had in fact earned income during these periods.

Pursuant to the audit, SARS issued assessments imposing additional tax and understatement penalties.

The assessed tax liability, however, was still less than the provisional tax already paid by the taxpayer.

Issue in dispute
One of the key issues before the court was SARS’ entitlement to payment of understatement penalties in accordance with section 222(1) of the Tax Administration Act No. 28 of 2011 (the TAA).

Broadly speaking, in terms of section 222 of the TAA, SARS may impose understatement penalties if the taxpayer’s conduct, within certain parameters, results in prejudice to SARS or the fiscus.

The taxpayer contended that SARS did not suffer any prejudice, as the taxpayer had in fact paid provisional tax due to SARS in excess of its assessed tax liability, which could have been set off against the amount standing to its credit.

SARS, however, had a different response angle and argued that the prejudice in question, resulted from the fact that it had to allocate additional time and human capital to audit the taxpayer’s affairs, to ascertain if the taxpayer’s request for a refund ought to be allowed.

The court confirmed that prejudice is not only determinable in financial terms and held as follows:
“Given the circumstances of this matter, I agree that the use of additional SARS resources for purposes of auditing the appellant’s tax affairs indeed prejudiced SARS.”

On this basis, the SCA found that SARS was entitled to impose understatement penalties, as contemplated by section 222 of the TAA.

Analysis
It is important to note that taxpayers would not be liable for penalties on the mere basis of being audited.
Understatement penalties can only be imposed in such instances if the audit reveals that the taxpayer indeed understated the amount of tax payable.

The intriguing part of this judgment is the fact that the SCA confirmed that there is a legislative measure that can be invoked to penalise taxpayers who wastefully consume SARS’ time and resources.

Of course, one can understand the rationale for a mechanism that would deter such behaviour, as there are undoubtedly taxpayers who take chances when completing their returns, only to plead ignorance when an audit exposes the fact that this was not done correctly or truthfully.

Taxpayers should welcome this decision, as our tax system would be brought to its knees if it becomes necessary for SARS to audit each and every taxpayer. 

Imbalance of SARS’ powers and taxpayer rights
In saying that, one searches in vain when looking for a similar provision in the TAA that would protect the taxpayer’s interests.

There is no balancing mechanism that similarly gives effect to the taxpayer’s constitutional right to administrative action that is lawful, reasonable and procedurally fair, which, by the way, the SARS Service Charter undertakes to uphold.

One need not look very hard to find examples (ask any tax practitioner) of cases where SARS officials treat taxpayers’ matters with palpable apathy, resulting in massive delays and additional costs for the taxpayer.

As things stand, there is no accountability and no potential cost-implication for SARS until the matter ends up in Tax Court.

At the current service trend, SARS may be inundated with cost orders, which would simply translate to a larger collection shortfall.

Where does this leave taxpayers?
The intrinsic takeaway from this judgment is, first, that taxpayers ought to ensure that full disclosure of their income is done and done correctly.

Intentional or not, SARS is obligated under section 222 of the TAA to impose the highest applicable understatement penalty percentage if your income is not declared correctly.

As a standard, this will be 100% and it will be on you to prove why you are deserving of a more lenient penalty.
Secondly, whilst the TAA does not make provision to penalise SARS for being obstructive, there are measures that one can take to bring SARS to the table and it is worth involving a tax attorney sooner rather than later, who knows how to traverse these obstacles. 

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.
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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: Marisa Jacobs, Director and Immigration Specialist at Xpatweb, Tax Consulting SA
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In September last year, then Minister of the Department of Home Affairs, Malusi Gigaba announced that a new critical skills list is expected to be released in April 2019.

The industry is in turmoil as business and providers scramble to submit visa applications prior to the list being published and certain categories removed.

Marisa Jacobs, Director and Immigration Specialist at Xpatweb says “There is no need to panic,yet!”

No need to panic
The Department of Home Affairs confirms the critical skills list will first be published in draft format and distributed for public consultation prior to finalising and legislating the new list.

The draft list is expected to be signed off by the Minister and distributed in April 2019.

Cooperation with Business to ensure a comprehensive the new list
On the one hand there is no list which will always be absolutely complete and comprehensive, in a specific place and time.

The requirements always evolve with time. Such as with the new oil and gas opportunities, we know there will be expansion in this area on the critical skills list.

“We have never failed to obtain a work permit for a foreigner where we can show that a local job is not taken and there is valid commercial rationale.” -Says Jacobs

The critical skills list is but one of various categories of obtaining a work visa.

Preview of anticipated draft list
The new list is much shorter than the current list, probably as Home Affairs saw many of the old categories not being used.

A positive development is that the draft version of the new list is more concentrated, by adding certain categories together.

The removal of the Corporate General Manager category has received much attention.

“We believe this category has been largely abused by many given rise to the proposed removal thereof.”
In its current form it is in need of a revamp.

“We agree that this category will or should not be removed in its entirety and the consultative process will provide the input required for the Department of Home Affairs to more directly and suitably define this skill and the form it should take on this list to curb abuse.” Says Jacobs

Submissions
Where anyone foresee a category not catered for, they are most welcome to email Marisa Jacobs on marisa@xpatweb.com with motivation and we will ensure that Home Affairs is made aware hereof before the list is finalized.

Also, where a category is not added under critical skills list, there are other categories under which a valid work permit can always be obtained.

ENDS

MEDIA CONTACT: Rosa-Mari Le Roux, 060 995 6277, rosa-mari@thatpoint.co.za, www.atthatpoint.co.za

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: Marisa Jacobs, Director and Immigration Specialist at Xpatweb, Tax Consulting SA
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TimesLive recently reported that prominent Cape Town immigration lawyer, Craig Smith, had been arrested for allegedly duping the Department of Home Affairs into granting visas to his clients.

The lawyer, who faces 1,125 counts of crimes ranging from fraud and forgery to money laundering, has also been accused of bribing home affairs officials for the “legalization” of his clients who had overstayed their permits.

According to the charge sheet, in some cases, his clients were complicit to the fraudulent activities, but there were many instances where the clients were wholly unaware that their permit applications had been compiled and/or been supplemented with false information and forged documents.

A warning to employers and expats
Marisa Jacobs, Director and Immigration Specialist at Xpatweb, says the recent case should serve as a warning to expats and employers alike.

While an employer may think that the immigration services they appointed obtained visas and permits legally, this can no longer be assumed or taken at face value.

“Now is the time to question the validity of your employee’s visas. Department of Home Affairs officials have become increasingly diligent about scrutinizing visa applications and the supporting documentation of work permits.

The arrest of such a prominent figure certainly explains why this is the case. There is an acute awareness of fraud and forgery and those who have obtained visas illegally are much more likely to be prosecuted than in the past,” says Jacobs.

What happens if you employ foreigners who have illegal visas?
Employers of workers who have illegal visas could face fines and up to two years imprisonment. Upon the third offence, per the Immigration Act, employers will receive imprisonment without the option of a fine.

HR Managers are the most likely to be held accountable if expats are working at the company without visas that they have legally obtained as they are deemed to be the gatekeepers of employees entering the organization and ensuring legally correct documentation,which includes work visas that are both legally obtained and legally allow a foreign national to work in the position they have been appointed and for the specific company.

Jacobs advises that when dealing with an immigration service, a red flag that employers and workers should look out for is exorbitant fees.

“At Xpatweb, we have never failed to successfully obtain a legal work permit for a foreigner who truly has a scarce skill that is needed in South Africa. When everything is above board, a consultant won’t have to justify ‘additional fees’ to obtain a permit,” says Jacobs.

When the Department of Home Affairs audits businesses, they don’t simply check visas and reference numbers on documents.

The Department’s inspectorate audits the underlying documents because many times, it is these documents that were incorrectly or illegally compiled and submitted as is seen by the charges laid against Smith.

Companies worried about the validity of their workers’ visas should consider employing an independent immigration service provider for a full immigration audit on all visas.

"Even if your employee obtained a visa before you appointed them, you can still be held accountable if the visa is illegal. For peace of mind, hire a reputable immigration service,” concludes Jacobs.

ENDS

MEDIA CONTACT: Rosa-Mari Le Roux, 060 995 6277, rosa-mari@thatpoint.co.za, www.atthatpoint.co.za

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: Tanya Tosen & Janine van der Merwe, Remuneration specialists at Tax Consulting SA

During the recent budget speech, Finance Minister Tito Mboweni announced that tax bracket limits would not be adjusted in line with inflation. This has working South Africans worried they will fall victim to “bracket creep”.

According to Tanya Tosen, Tax and Remuneration Specialist at Tax Consulting South Africa, it’s not that bad. “Employees don’t understand how their tax is calculated, so they fear the worst,” she says.

However, with a little professional tax training, employers can help their workers overcome this concern and keep them motivated.

What is bracket creep?
Bracket creep occurs when employees receive for example an annual inflationary pay increase which causes their income to fall in the next tax bracket.

In prior years the inflationary adjustments made to tax brackets would have ensured that the person stay within the same tax bracket.

The result in the new tax year is that, even though their purchasing power remains relatively fixed, SARS sees them as earning more and taxes them accordingly. “However,” says Tosen, “only those few who are pushed into a new bracket will pay more tax, and not as much as they think.”

Progressive tax system
The problem starts with misunderstanding how the country’s progressive tax system works. Many believe their entire income for the year is taxed according to the rate linked to the bracket within which their pay falls.

Rather, each bracket represents a specific portion of their total pay and the tax on any given portion is calculated at its respective rate.
For example, using the 2019/2020 tax tables, let’s assume a person earns R325,000 per year. This doesn’t mean their entire pay will be taxed at 31%, the rate for that bracket. Instead, they will be taxed at 18% on the first R195,850; 26% for the portion between R195,851 and R305,850; and 31% only for the portion between R305,851 and R325,000.

SARS makes the calculation easier by defining a base tax amount for each bracket, which is the precalculated sum of the total tax for all preceding brackets. The tax on the last portion (in our example, 31% of the amount above R305,851) can simply be added to the provided base tax to arrive at the total tax payable.

This tax liability will be reduced by an automatic rebate of R14,220, available to everyone under 65.

On this basis, it becomes clear that bracket creep affects just that portion of income that strays into a higher tax bracket. So a person earning R100 over the next tax bracket will only be taxed at the higher rate on that R100.

Training
Tax Consulting South Africa offers tax training to corporates to help anyone from employees to the HR director to the CEO understand these complex tax mechanics.

“A person who believes they are getting less out because of so-called bracket creep may feel they’re working at a loss,” reports Tosen.

“We’ve found they are much more appreciative of their reward package when they have a good grasp of how tax affects their take-home pay.” Tosen encourages all employers to ensure their staff understand their tax liability.

Structuring benefits
Companies that offer flexible benefits can provide staff with even greater assurance. This remuneration model allows employees to restructure their contributions to benefits on demand, giving them control over their income’s effective value.

“With assistance from a competent tax advisor,” says Tosen, “workers can channel funds to tax-deductible benefits to reduce the taxable income within their highest bracket.”

Leveraging benefits like the Employee Bursary Scheme, which lets employees fund their immediate family members’ educational expenses tax-free, or increasing contributions to an approved retirement fund, to name a few, are all legal means of minimizing one’s tax exposure.

Tosen encourages all employers to ensure their staff understand their tax liability as well as options on how to optimize their employees’ taxes where if possible.

ENDS

MEDIA CONTACT: Rosa-Mari Le Roux, 060 995 6277, rosa-mari@thatpoint.co.za, www.atthatpoint.co.za

ABOUT Remuneration Consultants:
Remuneration Consultants South Africa provides market leading remuneration and employee benefit consulting services.Our competitive advantage is adding a layer of tax optimization to the solutions we deliver. This enables us to optimally structure your Total Rewards System from the ground up to be fully compliant, where tax is planned proactively and not a mere afterthought.Our team consists of full-time tax attorneys, tax professionals, reward specialists, global remuneration professionals (GRP), chartered accountants, professional accountants and psychometrists.

For more information on Remuneration Consultants please visit:
Website www.remunerationconsultants.co.za
LinkedIn: Remuneration Consultants
Facebook: Remuneration Consultants

Authored by: Jean du Toit and Jonty Leon, Tax attorneys at Tax Consulting SA

If there was any doubt amongst taxpayers, especially South Africans working abroad, National Treasury, on 6 March 2019, categorically confirmed that it is forging ahead with the implementation of the amended section 10(1)(o)(ii) (“the Expat Exemption”).
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Since the announcement that the Expat Exemption would be amended in 2017, SA expats have been waiting with baited-breath to see how far the legislature would go.

Yesterday, National Treasury held a workshop to put SA expats out of their misery, although, after the workshop, it appears that misery is all that awaits them.

Submissions After Submissions Aimed at Policy Change
It was announced in the 2017 TLAB that the Expat Exemption would be repealed in its entirety.

Following extensive commentary and submissions, the Expat Exemption was limited to R1 million per annum, which is set to take effect in March 2020.

More submissions followed, as stakeholders identified a variety of problems with the limitation itself, which culminated in National Treasury conducting a special workshop to iron out any creases before D-day, being 1 March 2020.
Albeit that National Treasury stated at the start of the workshop that it will only deal with administrative and implementation issues, attendees, again, raised policy concerns included in their submissions.

At one point the National Treasury panel stated, in rebuttal to the amount of submissions brought before them, “make another three submissions, make nine, we will look at them but we take instructions from our political superiors.” – eerie feeling that public concerns are not top of their agenda.

Fringe Benefits - Taxable
One major point of contention was the taxation of certain fringe benefits ought to be exempt in certain instances.
What this means for SA expats is that if they remain SA tax resident, they will be taxed fully on any allowances and benefits, as if the employee was just a normal employee working in South Africa.

The consequence for the expat will be that his R1 million exemption would be depleted rather quickly.

Devastating Effects on SA Economy
The impact on the SA economy and workforce could arguably be more devastating.

The reality is that with this amendment, any additional cost would ultimately have to be borne by the employer, as no expat would accept an assignment without these benefits and, to ensure that these assignments remain lucrative, the employer would have to increase the expat’s package.

Employers may have to consider resources from other jurisdictions, as this becomes a simple question of math.

Administrative Trouble Looming
Aside from major policy concerns such as these, of which there are many; we were quite surprised that almost all other attendees only focussed on administrative and implementation issues, of which there are many more.

Without going into too much detail, it appears that payroll personnel, SA expats and in fact SARS officials are in for many growing pains and an overall torrid time when the amendment kicks in.

The only comfort, albeit cold, that was offered was that SARS will set up a dedicated head office function that would deal with matters pertaining to the amendment.

The truth is, however, that neither Treasury, nor SARS, who was also in attendance, had many answers to allay the fears of stakeholders.

We are now in Risky Territory
One attendee mentioned a very irate client of his who did Financial Emigration to Malta, believing Financial Emigration will completely absolve him from South African tax, where in reality Financial Emigration was clearly not the correct approach to follow based on his specific set of facts.

This is a prime example of someone who prima facie used an incorrect process to try to dodge taxes and in the process made fraudulent statements to SARS and SARB.

One must wonder if SARS and SARB will, as they should, follow up with this advisor to look into the affairs of this taxpayer and others who may have also acted on incorrect advice and who have abused the Financial Emigration process.

Your risk as the taxpayer becomes even greater where your advisor is not an attorney and any information shared with them is not subject to legal privilege, in which case your advisor would be obligated to disclose your information to SARS or SARB, leaving you to deal with the calamity brought on by your advisor’s lack of understanding of the law.

Solutions
Unfortunately, the solutions to this amendment are now becoming very limited.

The Expat Exemption only relates to South African’s who are tax resident, so the obvious answer would be to cease tax residency of South Africa.

However, doing this isn’t as simple as one might think. There are different options when doing this, but by far the cleanest and most direct approach would be to financially emigrate, provided, as noted above, correctly done.

Once one becomes a non-tax resident, their foreign earned income and their foreign assets are protected from the grips of SARS and this also gives protection against South African capital gains tax on most assets (you still have to pay Capital Gains Tax on South African fixed property when you sell) and protection against Estate Duty.

For those who cannot Financially Emigrate due to their factual circumstances, you would now be encouraged to start looking at Double Tax Treaty Protection, where applicable.

There are also additional international localised structuring opportunities available for those who are not working in Double Tax Treaty Countries, but again we must caution that we have seen numerous “products” being punted which are closer to tax evasion versus tax avoidance.
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ENDS

MEDIA CONTACT: Rosa-Mari Le Roux, 060 995 6277, rosa-mari@thatpoint.co.za, www.atthatpoint.co.za

ABOUT Tax Consulting SA:
Tax Consulting SA offers a streamlined service in the calculation and filing of individual income tax returns, provisional income tax returns or any other more complex individual tax relate matters. Our highly qualified team of Tax practitioners are registered with SARS under controlling body of the South African Institute of Tax Practitioners (SAIT). As tax specialists, we remove the burden from clients to keep their tax affairs in good order, achieving optimal tax savings while ensuring full compliance.

For more information on Tax Consulting please visit:
Website:  http://www.taxconsulting.co.za/
LinkedIn: Tax Consulting South Africa
Facebook: Tax Consulting South Africa

Authored by: Jonty Leon, Tax Attorney at Tax Consulting SA

Financial Emigration Ceases Tax and Exchange Control Residency
The process of “Financial Emigration” terminates your tax residency status with the South African Revenue Service (“SARS”) as well as your status as exchange control resident with the South African Reserve Bank (“SARB”).

The SARS process includes a verification or “audit” procedure, as financial emigration is not something that is casually agreed to by SARS, because they are prohibited from taxing the non-resident on worldwide income.

The upshot is also that when you complete your South African or offshore bank’s CRS and/or FACTA forms, you can formally note yourself as non-resident for South African tax purposes.

The SARS process is duly evidenced by an “Emigration Tax Clearance Certificate”, which is part of South African Administrative Law and comes with a guarantee as per section 33 of our Constitution.

Does the Emigration Tax Clearance Certificate Guarantee Legal Defence?
This is a double-edged sword
It is imperative to apply for tax non-residency in a correctly completed financial emigration process.

When the financial emigration process is not correctly administered, there is no protection and tax residency is not correctly terminated. There is no prescription under administrative law if due process was not followed.

We are increasingly encountering SARS auditors who look at the substance of applications and the only path of prudence is to have an “audit file” prepared in case of future SARS investigation.

There is no time to get your ducks in a row once an audit commences, so prepare in advance.

Is Financial Emigration the Only Option?
Of course not, there are many options. Our views on the options and way forward for the expatriate community have been recently noted by Jerry Botha of Tax Consulting SA.

So Many Expatriate Tax Experts, Suddenly
There is a definite amusement factor to the flurry of experts now commenting hereon, in the areas of international tax. None of them were present in Parliament in 2017 arguing against the tax law change, or attended the National Treasury and SARS consultative sessions; yet now are very vocal as the implementation of the amended law approaches.

Noting this, how do you choose a provider to assist with financial emigration or with expert guidance?

• Make sure they are registered Tax Practitioners, at the very least. Unbelievably, there are many advisors with vehement opinions but they are not even registered with SARS, let alone competent in this complex area of law. They “operate” their businesses working on your SARS e-filing profile while often “outsourcing” the tax component to someone else.

 

• Advise given by “experts” should have the backing of Admitted Attorneys – Tax and any SARS matter are adjudicated in law, thus when things go awry, Court is almost unavoidable. Therefore, having been to Tax Court or the High Court really should be a pre-requisite in dealing with matters of a certain level of complexity. Other skill sets useful are a CA(SA) / Registered Accountant, CPF® with own FSB license and passport/work permit experts. Proper financial emigration requires a holistic approach.

 

• We see many expatriate client matters in utter disarray where they have used a “one-man-band” who has since disappeared. Furthermore make sure you deal with the real advisor/s, as we are increasingly seeing “marketing” agents who just stir to farm for clients, which often takes the shape of criticism and fear mongering.

 

• Where the rubber hits the road – How many Financial Emigrations has the provider actually done and with how many cases are they currently busy? Experience wins.

We strongly recommend that proper due diligence is done when using a provider for something as important as Tax Residency. Secure a provider with a strong Tax and Legal compliment.
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: Mariana Stander, Partner & Jean du Toit, Senior Tax Attorney at Remuneration Consultants, Tax Consulting SA

In what now seems to have become an annual occurrence, the Minister of Finance, Tito Mboweni, has announced during this year’s budget speech that there will, again, be a tax revenue shortfall – this time to the tune of R43 billion.
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Despite promising initiatives implemented by the South African Revenue Service (SARS), it appears that its tribulations in meeting its collection target have not yet waned.

With the pressure mounting on SARS to make up the shortfall, it has become more assertive with its collection stratagems and payroll audits seems to be SARS’ latest weapon of choice.

SARS’ Honeypot
The simple reason behind SARS’s targeting of payroll when it needs extra taxes, is purely because of its tendency to contain errors, as well as the potential to collect large sums of tax from a single taxpayer.

Mistakes are magnified by the size of the company’s payroll and SARS can, and will, collect any underdeclared taxes from the employer, as opposed to the individual taxpayers themselves.

In the case of a large payroll with many employees, even the smallest errors can leave a company with a large tax exposure, as these errors are proliferated across the employee base.

In other instances, inexperienced payroll administrators simply do not know the law, which results in glaring errors such as failing to tax fringe benefits or paying lump sums without getting tax directives.

The truth is that SARS will find something, and most employers only become fully compliant once they have gone through the ordeal of a payroll audit conducted by SARS.

Rising Trend
As if the challenges of a payroll audit are not daunting enough, a new trend has become apparent that makes it increasingly difficult to get a clean bill of health from the SARS audit team.

Rather than identifying specific items that were inaccurately treated on payroll, SARS has now turned its gaze to the financial statement aspect of payroll.

These statements are assessed by SARS for an understatement or short payment of employees’ tax purely on the basis that there is a discrepancy between the company’s payroll reconciliation and the cost of employment as reflected in the company’s annual financial statements.

This is despite SARS’ awareness that not all amounts reflected in the annual financial statements under cost of employment should be processed to the payroll.

Nevertheless, the onus is placed on companies to dispute this and to explain why the amounts making up the difference is either exempt or not taxable. This is a quarrelsome task, as this effectively equates to finding a needle in a haystack and then proving that it is not subject to tax.

Unblemished payroll
Given the ease with which SARS can collect revenue by targeting payroll taxes, a head-in-the sand approach is ill-advised and will end in calamity.

The best defense is to have your payroll audited independently, before SARS decides to do so, to ensure that any issues are addressed.

This will minimise the affliction of any future audits by SARS and any errors detected can be disclosed via SARS’ Voluntary Disclosure Programme.

Otherwise, if SARS comes knocking, you are in for an unpleasant dispute with SARS and penalties that may just exceed the actual taxes payable. 

ENDS

MEDIA CONTACT: Rosa-Mari Le Roux, 060 995 6277, rosa-mari@thatpoint.co.za, www.atthatpoint.co.za

ABOUT Remuneration Consultants:
Remuneration Consultants South Africa provides market leading remuneration and employee benefit consulting services.Our competitive advantage is adding a layer of tax optimization to the solutions we deliver. This enables us to optimally structure your Total Rewards System from the ground up to be fully compliant, where tax is planned proactively and not a mere afterthought.Our team consists of full-time tax attorneys, tax professionals, reward specialists, global remuneration professionals (GRP), chartered accountants, professional accountants and psychometrists.
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For more information on Remuneration Consultants please visit:
Website: www.remunerationconsultants.co.za
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Authored by: Kelsey Jayes, Tax Attorney and Christopher Renwick, Senior Tax Attorney at Tax Consulting SA

It is one of those things you need to personally experience; otherwise you will never fully comprehend how frustrating things can become. 

When you get audited by certain SARS officials before payment of your Value-Added Tax (VAT) refund, expect the long road and frustration, often when your business really needs the cash flow.

This is not an isolated occurrence for frustrated taxpayers either. In his budget speech of 20 February, Minister of Finance, Tito Mboweni, stated that SARS is committed to reducing the R31 billion VAT backlog that currently exists. 

Clearly, the frustration felt by taxpayers is appropriate given such a massive backlog.

But, Why Is This So Difficult?
There are many theories – ranging from administrative deficiencies to internal targets and one can speculate until blue in the face. But that doesn’t solve the problem that frustration across the board has hit its peak with respect to VAT refunds being paid (or, rather, not paid) by SARS.

We must caveat here that there is always another side to the story. VAT refund fraud has happened, it may even be rife, especially as counterfeiting can create a near perfect-appearing tax invoice. 

It is understandable that, given the number of fraudsters and chance-takers in the market, hesitance on the part of SARS is present, rather than simply handing out refunds to every VAT claimant without careful scrutiny. The SARS auditor is obligated to correctly apply the law, even though it takes a little while longer than expected.

The Perfect Storm
Many compliant taxpayers feel that they are mistreated on their VAT refunds. This may be partly due to the perfect storm of a shrinking economy, financial strain, administrative delays and perceived deliberate delays which occur when SARS owes you money, compared to their sudden efficiency when you owe them. 

These delays and difficulties are placing financial strain on the business fraternity, and with some of our clients, we have seen that this comes down to survival.

The backlog mentioned earlier must surely be putting many small businesses to rest. Which will have the knock-on effect of disrupting the economy further and so forth and so on. If this continues, at what point will the effects be felt by more sizeable enterprises?

SARS Auditors and Dispute Resolution
So, how do we deal with this perfect storm and ever-growing frustration?  

Taxpayers are expected to be courteous with their SARS auditors, but what do you do when you are faced with bureaucratic hoops created by constant requests for documentation that support the rebate, with an apparently vexatious SARS?
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The Tax Administration Act, read with the Rules promulgated under section 103, provides a very strong and balanced SARS dispute resolution process. 

The typical accountant or attorney can deal with the process of Alternative Dispute Resolution, complaint escalation and even Tax Ombudsman submission, but we find that this sometimes has limited results.

When you know you are correct, there is always the right of access to the Tax Board or Tax Court. It is never a good idea to approach the court on weak facts, so, typically, it is our view that you have your case “tested”, which is a proper review of the merits. 

Where you are one of the compliant taxpayers, consider fast tracking your matter by taking cognizance of the following points:

• Submit an appeal without the “ADR” option. This means that the matter goes straight to Tax Board / Tax Court and everyone knows you mean business. ADR is frequently utilised for the purposes of settling and one has a different discussion when one is after an outright win.

• The correct Tax Board / Court application normally gets resolved way before stepping into the courtroom. Highly competent persons concede before SARS decides to litigate and this is almost always a totally different experience than dealing with an auditor who does not want to release a refund.

• Do not take on the legal route lightly. It is essential that you comply with the Rules to the letter to ensure your matter is compliant so that no further administrative delays occur, or, even worse, that you have an adverse decision due to an administrative failure; and

• Your well-constructed heads of argument submitted with your notice to the appropriate forum should be presented to SARS’ National Appeals Committee by the assigned clerk or court specialist for the purpose of deciding on the appropriate steps for SARS to take.

The legal route is very much embedded in our tax law as part of the Despite Resolution process and we foresee that the correct representation will become an integral part of resolving complex and high-value SARS matters.

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/
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