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
LinkedIn: Remuneration Consultants
Facebook: Remuneration Consultants

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/
LinkedIn: Tax Consulting South Africa
Facebook: Tax Consulting South Africa

Authored by: Jonty Leon, Financial Emigration Legal Manager at Tax Consulting SA
 
The Budget Speech is just one of the times where a tax attorney shows their worth. Instead of just reviewing the headlines, a tax attorney should be delving into the budget proposals, current policies and policy adjustments.

The need for an in-depth review is vital to understanding the upcoming impact.
 
On 20 February 2019, the South African Minister of Finance, Tito Mboweni, gave his Budget Speech in Parliament. Among various issues discussed, important to note from a disclosure perspective is the mention of the globally agreed Common Reporting Standard (“CRS”).
 
Importance Of The Common Reporting Standard
Mboweni’s mention of CRS in his Budget Speech shows a clear nod in the direction of reigning in non-compliant taxpayers who fail to disclose their income fully. Globally, people have been attempting to skirt the radar and “hide” their assets and income from tax authorities.
 
However, OECD has worked exceptionally hard to locate those that are non-compliant and have noted that offshore structures have been specifically designed to “circumvent financial account reporting under the OECD’s Common Reporting Standard”, as stated in the Budget Speech.
 
Penalties for Secrets
The most common question I hear from clients who have not disclosed all their income is, “How would they ever find out?”.
 
While we all enjoy our privacy, unfortunately, our privacy is not protected when it comes to our income. The Revenue Authority must be paid its pound of flesh and with CRS there is nowhere to hide. Banks and Revenue Authorities around the world are being forced to share information with each other.

This means that putting money into offshore structures, thinking that you are safe from the tax man, is no longer the case.
 
Mboweni stated the OECD’s mandatory disclosure rules be implemented in South Africa, meaning that there is even less wiggle room for those that continue to fail to disclose their income. Further, Mboweni suggested that similar penalties for those that are non-compliant with the rules be levied.
 
Nowhere to Run, Nowhere to Hide
Once you have been reported in terms of the OECD rules for non-disclosure, this triggers a “series of unfortunate events”. Then Revenue Authorities will delve deeper into your past dealings and the income received previously. They will be searching for further indiscretions or non-disclosure events.

The more they find, the more penalties will be levied and the higher the chance for criminal sanctions.
 
The point – one must be honest and open with their income. Non-disclosure will catch up with you. It is not a case of “if”, but rather a case of “when”, and the “when” seems to be coming sooner than we all think.
 
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, Attorney & Jean du Toit, Senior Attorney at Tax Consulting SA

National Treasury has invited key stakeholders to a workshop early next month to address continued concerns around the amended foreign income tax exemption.

The change is set to become effective on 1 March 2020.
 
In terms of the amended section of the Income Tax Act, South Africans working abroad will in future be taxed in South Africa on any foreign income exceeding R1 million.
 
This will have a major impact on the competitiveness of South African professionals and the remuneration policy of multi-national South African companies, say Tax Consulting SA’s legal experts.
 
Another legislative cycle
Although the workshop, scheduled for 6 March, is done post-budget, it does open the way for comments and submissions to be included in the new legislative cycle, says Tax Consulting attorney Jean du Toit.
 
This means if treasury accepts the comments and submissions presented during the workshop to address the concerns, the tweaking can be done before the amendment takes effect in 2020.
 
Major concerns back on the table
Du Toit says they want to address the substantive issues with the law change during the workshop rather than administrative concerns around the implementation of it.

“We hope and believe that the workshop will address the fact that the law as it currently stands must either be scrapped or amended.”

One if the big problems Tax Consulting has with the amendment is the inclusion of fringe benefits into the taxable income of foreign employees.
 
“In some instances, taxpayers are offered certain benefits that are actually absolute necessities because of the jurisdictions they work in, such as the services of a security guard or a driver if they work in a jurisdiction where this is an absolute requirement.”

However, says Du Toit, in terms of South African legislation that would be considered a fringe benefit. If this cost is included in their taxable income, the expat would easily exceed the R1m threshold set out in the act.
 
“Their taxable income would be unrealistically or disproportionately inflated,” states Du Toit.
 
Another major concern relates to the exemption-cap being expressed in South African Rand.Most expats are earning in dollars or pounds or dirhams.
 
“As the South African Rand weakens against these currencies South Africans are effectively paid more in the foreign currency simply because of the volatility of the local currency. ”This is something neither the employee nor employer has any control over.
 
Tax Consulting referred to the XE Corporation’s historical rates and notes that fluctuations in exchange rates over the past decade has been glaring. For the Rand/US Dollar it was 106%, Rand/Euro 61%, Rand/British Pound 33% and Rand/Emirati Dirham 106%.
 
Increased burden for employers
Many South African multi-national companies send their employees all over the world, says Tax Consulting’s attorney Jonty Leon. 
 
Given the fact that most expats will earn more than R1 million when their remuneration package is converted to rand, they are now facing a much heavier tax burden than what they signed up for.

Expatriate employees are looking to their employers for relief. “If the employer does offer relief, it in essence affects the entire business model going forward. Expats cost of employment will be increased dramatically because of the change in legislation.”
 
Leon says this may lead to employers looking for local employees in the foreign jurisdictions where they operate, or more so they may source skilled people from other countries whose tax laws are “more forgiving”.
This will render South African professionals less attractive.
 
Going forward
Leon says treasury initially proposed the entire scrapping of the tax exemption provision, but following a workshop in 2017 introduced the R1 million threshold.

However, despite this concession treasury was again inundated with submissions and comments in December last year and has set aside 6 March to focus on remaining concerns.
 
 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: Vincent Radebe,Tax Consultant & Darren Britz, Senior Attorney at Tax Consulting SA

With the 2018 tax filing season having come and gone, several taxpayers got in contact with us after receiving a nasty surprise on their income tax assessment.

Taxpayers who confidently filed their returns as non-provisional taxpayers were subsequently informed of their failure to register as provisional taxpayers and were punished for such failure by the imposition of a penalty to the value of 20% of their tax liability.

As tax specialists, we find the taxpayer more than ever before are asking the questions:
• “What is provisional tax? 
• “Who is a provisional taxpayer?”

What Is Provisional Tax?
In layman’s terms, provisional tax is merely a prepayment of tax for the tax year based on an estimate of the taxpayer’s taxable income.

When looking from a natural person’s perspective, provisional tax is mainly aimed at the collection of a person’s normal tax liability due to non-salary income or multiple sources of income. In a nutshell, taxpayers who derive income that is not subject to PAYE are provisional taxpayers.

When Should You Register as A Provisional Taxpayer?
If you fall under any one of the following categories, it would be a good idea to register as a provisional taxpayer:

1. You receive salary income from foreign employers and do not qualify for the foreign employment income exemption under section 10(1)(o)(ii) of the Income Tax Act;
2. You receive salary income from employers not registered for PAYE;
3. You are an independent contractor or a sole proprietor;
4. You receive salary income from multiple employers;
5. Your income does not constitute a salary, i.e. income not subject to PAYE. This typically includes but not limited to rental income earners or interest income which is more than R23 800 per annum (for persons younger than 65 years) or interest income which is more than R34 500 per annum (for persons aged 65 years or older);
6. If you have a registered company and/or close corporation; or
7. When SARS notifies you, by way of your statement of account, that you are a provisional taxpayer.

Important Deadlines For Provisional Tax Payments
There are two compulsory provisional tax payments per tax year, namely first provisional tax payment and second provisional tax payment. The first provisional tax payment covers the first 6 months of a natural person’s tax year (i.e. 1 March to 31 August each year).

The second provisional tax payment covers the second 6 months of a natural person’s tax year (i.e. 1 September to 28 February each year). It is of utmost importance for a person’s first and second provisional tax payments to reflect in SARS’ bank account by 31 August and 28 February, respectively.

Failure to register and file as a provisional taxpayer?
SARS Gives No Quarter

Taxpayers who fail to register as provisional taxpayers and de facto do not file provisional tax returns nor make provisional tax payments, are penalised by SARS on assessment.

This penalty is referred to as the underpayment penalty and amounts 20% of the tax liability due for the year of assessment in question. SARS will leave no stone unturned when it comes to revenue collection and will go as far as to prosecute non-compliant taxpayers, even prominent celebrities, as was observed with Bonang Matheba and Teko Modise during last year.

Be Prepared And Well-Informed
It is important to bear in mind that provisional tax is not a separate tax but rather an advance payment of a person’s tax liability for the relevant year of assessment.

Ergo, when SARS assesses a taxpayer subsequent to submission of an ITR12 personal income tax return, all provisional tax payments made during the year of assessment, parenthetically including PAYE, are deducted from the person’s tax liability for the year in determining the net amount payable by or refundable to the taxpayer.

Special care must be taken when calculating one’s tax liability to avoid any nasty surprises from SARS down the line.

The deadline for the second provisional tax returns submission and payments is 28 February 2019.

For expeditious assistance regarding your IRP6 provisional tax return and ITR12 income tax return, it is best to approach tax specialists to ensure optimal preparation of your provisional tax obligation.

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: Kelsey Jayes, Tax Attorney & Ruan Botha, Tax Attorney at Tax Consulting SA

Often considered a waste of time and certainly an area of contention in most households, is the concept of gaming. Spending hours in front of a computer or console, whiling away time that could be used more productively, according to many parents. 

Viewed as an anti-social hobby that is of no value. However, this perception could not be more incorrect and outdated.
To the surprise of many people, and to the excitement of many others, professional gaming or “eSports” is a rapidly growing and extremely lucrative “hobby”. Some prize pools have reached as high as R347m. That’s not a typo
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eSports?
While it’s not the Premier league or Super Rugby, eSports is a professional gaming competition whereby people from all over the world play video games against each other and the winners are awarded with a prize, usually in the form of money.

South Africa even has a controlling body for this, an organisation by the name of Mind Sports South Africa.

The ever-growing popularity of eSports has had both a societal and an economic impact in many countries, including South Africa, and the traditional views of video gaming has seen a shift from lazy and mindless, to strategic and stimulating.

The fact of the matter is that, while previously, gaming has been considered a complete waste of time, there now exists a tangible and profitable profession for the dedicated eSports men and women of the industry. Pac-man for a pay check? Mario for moola? You get the idea.

However, with great prize pools comes great responsibility. This responsibility is in the form of one’s Call of Duty, if you will. Taxes.

Gamers are, after all, engaged in a profession that generates an income for them. And, as with all professions, taxes must be paid on that income.

Classification Wars
To provide you with an example, let’s say you are a professional player of League of Legends (now, now Dota2 fans, this is merely an example), and you win a tournament where you are awarded a sum of money.

That money then gets paid to your “club/clan”, or the company who manages the team, and thereafter gets distributed to you as the player.

The burning question here is whether you, as the professional player, are considered an “employee” of the club, and are thereby earning remuneration. This is an important consideration as employers are required to withhold PAYE on remuneration paid to employees.

So, how do you know whether you are an employee of your club?

The answer lies in the manner in which you conduct your battles. Factors such as whether you are working at the premises of the club, the extent to which your gaming is supervised and your “working” hours play a role in this determination, this being regardless of your ranking or your KDA ratio (for all the noobs out there, this is short for Kill / Death / Assist).

It should be kept in mind that, where you as a gamer receive prize money in your personal capacity (without the clan/club level interaction) you have an obligation to pay tax on those funds received. There are no two ways about it.

For the clubs/clans out there who are managing and paying their respective players, have you considered the VAT implications of running the club/clan? If you haven’t, now’s the time.

Battlefield: SARS
Now, don’t get me wrong, I am not saying that you should rush off to file tax returns for the winnings you receive from your valiant battles – one must first determine whether this is even necessary.

The first point of departure is to confirm the nature of your earnings. How, you may ask? Well, you seek the advice of a tax attorney, of course.

After all, when it comes to SARS, you can’t just reload at the last checkpoint. Once they are knocking on the door, you’re likely to find yourself in a bit of a tight spot.
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Unless, of course, you are lucky enough to be a terrible gamer, or you’ve consulted the right people.

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: Jerry Botha, Managing Partner at Tax Consulting SA & Johnnie Kruger, Tax Attorney at Tax Consulting SA

The Taxation Laws Amendment Act No. 23 of 2018, promulgated on 17 January 2019, extended the Employee Tax Incentive scheme (“ETI scheme”), which would have lapsed on 28 February 2019, for a further 10 years.

This is now part of our very sparse tax breaks offered by Government for the long haul and which is an easy and totally risk-free claim the employer can make, provided done correctly.

The benefits are simple and novel, being the employer gets a monthly cash tax break whilst employing the youth and giving those most in need of opportunity a chance to enter the employment market.

The ETI Purpose
The ETI has been effective from 1 January 2014, aimed at combatting high youth unemployment and the resulting long-term adverse effects on the economy. Restrictive labour relations combined with a lack of skills and experience have made potential employers hesitant to hire the youth.

The ETI scheme encourages employers to hire young work seekers by effectively reducing the cost of hiring young people. This is done by an immediate and monthly reduction in the amount of Pay-As-You-Earn that the employer needs to pay, whilst not affecting the wage receivable by the employee.

Thus, the tax saving is handed to the employer monthly, which saves administration and guarantees an immediate refund – quite nifty design.

Criteria of the ETI
Employees that qualify under the ETI scheme will need to meet the following requirements:
• Possess a valid South African ID, Asylum Seeker Permit or an ID issued in terms of the Refugee Act;
• 18 to 29 years old (no age limit is applicable if the employee renders services in the special economic zone (“SEZ”) as designated by the Minister of Finance);
• Not employed as a domestic worker;
• Not a “connected person” to the employer;
• Employed by the employer or an associated person in relation to the employer on or after 1 October 2013; and
• Paid the minimum wage applicable to that employer or if a minimum wage doesn't apply, paid a wage of at least R2,000 and which may not exceed R6,000.

Minimum Wage Requirement Oversight
Government is often criticised for the left hand not knowing what the right hand is doing and this is an example as good as it gets.

On 23 November 2018, President Cyril Ramaphosa signed the Minimum Wage Bill into law, which sets the minimum wage at R20 per hour, or R3,500 per month, with effect from 1 January 2019.

​It is noteworthy to point out that one of the major stakeholders in legislating the minimum wage was NEDLAC, the same council that partook in the consultations to extend the ETI scheme.

What would be the rationale for Government and NEDLAC agreeing an acceptable minimum wage of R2,000 for ETI, but promulgating a national minimum wage of R3,500?

Hopefully, the new Finance Minister, Tito Mboweni, will let sensibility prevail and make an announcement hereon in his Budget Speech on 20 February 2019.

We would call for the minimum to not just be moved to R3,500 for ETI, thus forcing adherence by employers, but also that the maximum should be given a proper increase.

ENDS
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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: Jerry Botha, Managing Partner at Tax Consulting SA & Jean du Toit, Senior Attorney at Tax Consulting SA

The arrival of Angelo Agrizzi at the State Capture Commission has been nothing short of spectacular.

The testimony of the former Bosasa Chief Operating Officer implicates a horde of people in several corruption scandals that have long been suspected, and then some.

We now have a smoking gun and the nation’s gaze turns to the National Prosecuting Authority (NPA), to see if it will capatilise on Agrizzi’s birdsong.

The public wants to know, will someone finally end up behind bars now?

The truth is that, even with Agrizzi’s evidence, damning as it may be, an outright conviction on criminal charges such as corruption, bribery or fraud is, at this stage, improbable.

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 NPA years to build a robust case.Even then, a conviction is by no means guaranteed.

If some media reports are to be believed, they have been sitting on matters for 10 years, so it does not take too much imagination to see that they will rather have the perpetrators die of old age, before letting them have a day in court.

SARS, on the other hand, has made clear its intentions when it announced that it will investigate Agrizzi’s allegations insofar as they relate to tax evasion (Read full statement here)

“SARS is concerned that names of some former employees have been mentioned in alleged wrongdoing and would like to assure the South African taxpayers and public that these will be investigated without fear or favour and guilty persons will be brought to book.”

Hopefully, the NPA has taken notice of SARS’ interest. It would not be a bad idea at all for the NPA just be to hitch its wagon to SARS’ star.

Lest anyone forget, Al Capone, one of the most publicised racketeers of the twentieth century, was not convicted for his most notorious crimes, but for tax evasion.

Federal prosecutors worked for years to build a case against Capone but could never gather enough evidence to get a conviction. Capone was eventually convicted for tax evasion and the rest is history in prison.

Tax evasion is a more attainable conviction because proving the elements of the crime is duck soup when compared to, for instance, corruption.

Tax evasion, in very simple terms, requires that there was a receipt of anything with an ascertainable money value that was not disclosed to SARS. It is a crime that does not concern itself with the legality of the receipt, the purpose thereof, by whom it was paid or what it was used for.

It simply asks, was it taxed? We may be guessing, but it is unlikely that any of the “payments” made were disclosed by Bosasa or their recipients.

The new NDPP, Shamila Bathohi should consider when she takes office next week, to go visit Mark Kingon, the current acting Commissioner at SARS.

His investigators are presumably already having a look at where these payments are shown in the books, adding back the numbers and raising PAYE assessments plus 200% penalties. Where the NDPP follows the money, early convictions for tax evasion will give her much needed quick successes.

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 Agrizzi’s choir once they have been pinned on tax evasion, to strike a deal that may lead to the bigger fish ending up behind bars.

ENDS
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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: Claudia Aires Apicella, Head of Financial Emigration at Tax Consulting SA

The announcement by National Treasury and SARS in 2017 that the tax exemption on South African expatriates is set to change, has resulted in the lifestyle of many South Africans, who are employed by companies abroad, to rapidly change from a South African tax liability point of view.

The legislative amendment, which will come into effect on 1 March 2020, states that South African tax residents abroad will be required to pay tax to South Africa of up to 45% of their foreign employment income, where it exceeds the R1m threshold.

With the commencement of the new law fast approaching, SARS has begun prosecuting taxpayers that are non-compliant and, in some cases, has the option to imprison the offender up to a period of two years.

This is in terms of the Tax Administration Act and with the help of the now fully active Common Reporting Standard (CRS).

SARS amendments already implemented in preparation of the foreign income tax law change come March 2020 are as follows:
SARS Interpretation Note 16 (Issue 2) – released February 2017 – Section 10(1)(o) test
SARS Interpretation Note 3 (Issue 3) – released 20 June 2018 - Ordinarily Resident test
ARS Interpretation Note 4 (Issue 5) – released 03 August 2017 – Physical Presence

SARS concerned about expatriate non-compliance
National Treasury and SARS has put forward in Parliament, that researched numbers on expatriate tax submissions revealed that the majority of South African passport holders and permanent residents have simply left, without formalising their affairs with SARS or the South African Reserve Bank.

This has prompted not only a law change, but also a stated SARS tax audit focus on those expatriates who have left and simply decided to ignore their taxes.

While some did not consider it necessary to submit tax returns in South Africa, others submitted zero tax returns to SARS.

In some cases, individuals even indicated that they were unemployed on their tax returns while earning expatriate salaries.

While many expatriates hope that SARS will drag their feet, the 2017/18 South African tax return already included targeted questions dealing with expatriate tax status.

The questions may appear innocent enough, but we have seen this trigger an automatic verification or audit process. Where the question is marked false, this is a criminal offense, thus creating an even more serious problem.

No more hidden off shore accounts
SARS has committed itself to complete its implementation of the Organisation for Economic Corporation and Development’s (OECD) Common Reporting Standard (CRS) by end of December 2017.

This means there will no longer be offshore hidden money, as the world has followed the United States’ lead in forcing disclosure by financial institutions of any account owned or otherwise connected to South African residents or citizens.

SA citizens or residents who do offshore banking will be reported to SARS, this will be an audit trigger where your SARS profile is not correct.

The solution
To avoid criminal prosecution, South Africans working abroad can opt for financial emigration, this is a formal process with the South African Reserve Bank (SARB) to change one’s tax status from “resident” to “non-resident”.

Financial emigration provides legal certainty on non-residency status for tax and exchange control purposes, as well as holding certain financial planning benefits such as the one of the few ways of cashing out your retirement annuity.

When one emigrates financially they cease to be a South African tax resident and will not be liable to pay any South African tax on their worldwide income.

They will however be required to declare any South African sourced income which may be taxable, such as rental income.

Photo caption: Claudia Aires Apicella

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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