South African expatriates who ignore their tax obligations will soon find themselves in hot water with the South African Revenue Service (SARS), warns Jashwin Baijoo, legal officer at Tax Consulting South Africa.
Baijoo said these expats urgently need to review their compliance status with an expatriate tax professional or risk a major personal financial crisis and even jail time.
This is especially true of those working in African countries, who might blindly assume that they are not taxed due to a double taxation agreement the nation has with South Africa, he said. declared.
“Legally, every South African, wherever they are on the planet, must declare their annual worldwide income to SARS and pay taxes on that income for the rest of their life,” said Baijoo.
“While in the past, expatriate income was largely tax exempt, as of March 1, 2020, their income above R25 million is subject to tax of up to 45%.”
Moreover, if an expat working in Africa is a businessman, self-employed or works for a foreign company, he becomes a temporary taxpayer, he said.
“A provisional taxpayer is anyone who derives income from a source other than employment with a South African PAYE registered employer,” Baijoo explains.
“If this is the case, they must declare their estimated annual income in advance, pay half of their tax by August 31 and the balance by February 28 or 29 of the following year.”
Double taxation agreements
Baijoo said African countries have dual tax deals with South Africa to ensure expatriates are not taxed by both governments.
However, this does not exempt them from reporting their annual income to both SARS and to that country’s tax administration. Also, if the tax in that country is less than what would have been paid in South Africa, they may have to pay the difference to SARS.
Each country’s dual tax treaty differs in its requirements, again suggesting that assistance from an expatriate tax expert is essential.
“Most of the cases we deal with are the result of poor tax planning on the part of those who do not know or are qualified for the intricacies of expatriate taxation.”
“Unfortunately, a recent change in tax law means that even expats who have simply been negligent in their reporting could still face up to two years in prison for their surveillance.”
It is also dangerous to believe, as has been done in the past, that SARS will never uncover the hidden income, Baijoo said.
The South African government recently provided SARS 3 billion rand to strengthen its audit and tracing capabilities using advanced technologies such as artificial intelligence (AI).
The tax administration is also involved in sharing financial information with many other countries as part of a global effort to reduce tax evasion and money laundering.
“The point is, SARS gains incredible power at detecting non-compliances with third-party data and quickly gets close to delinquent taxpayers,” he said.
400 billion rand hidden abroad
In April, SARS Commissioner Edward Kieswetter announced that the tax collector will focus on an estimate 400 billion rand hidden in accounts abroad.
Kieswetter said South Africa has an automatic information exchange protocol with around 160 countries – with actual data received from 87 countries.
“From these countries, we learned that we have approximately 1.38 million reportable records that we received for the 2019 reference period.
“(These records) tell us that there is an amount of approximately R26.6 billion held in offshore accounts only of these 87 countries. This is how we come up with an amount well over 400 billion rand – that’s a simple translation, depending on the exchange rate of the day. “
These comments should be a warning to South Africans who have assets overseas to get their affairs in order, says Reinert van Rensburg, specialist at Tax Consulting SA.
“As part of the Automatic Information Exchange (AEOI) Agreement, which SARS signed in 2014, SARS now automatically receives all the information it needs regarding foreign income flows from South African tax residents.
“This information includes the individual’s name, tax reference number, account number, account balance and income generated by the account. It was the very access to this detailed information that awoke SARS to the reality that 400 billion rand is currently being held abroad by South African taxpayers, ”he said.
Read: South Africans take longer to repay government debt each year