You are currently viewing our desktop site, do you want to download our app instead?
Moneyweb Android App Moneyweb iOS App Moneyweb Mobile Web App

NEW SENS search and JSE share prices

More about the app

Avoid tax wolves in sheep’s clothing

6 things to look out for.
Image: Shutterstock

Post-Covid economic resurgence saw an increase in international work opportunities. With skills in hand, many South African professionals have become sought-after in other countries. As a result, their finances and subsequent taxation have come under scrutiny. However, along with the awareness of tax complications, another threat has emerged.

Financial emigration (FE) and double tax agreements (DTA) became instant buzz words among expats and tax experts alike. While the ideal should be to seek every possible relief for clients, there are independent tax advisors who mislead clients or give them misinformation to attain the business.

This negligent and unethical conduct has a catastrophic effect on the individual’s financial status in the long run, not to mention the severe legal consequences that are sure to follow. Now more than ever, South Africans in the process of emigrating or earning an income in another country, must be vigilant when seeking counsel from tax consultants.

How to tell the wolf from the sheep?

Unethical tax advisors confuse clients with legal jargon and financial terminology, while making promises that can’t be kept or assumptions that have no merit. While their actions create a lot of confusion about expatriate taxation laws or Sars submission processes, the challenge has become to avoid these agents of misinformation.

Here are some red flags to look out for

If you are in consultation with a tax advisor, or you are in the market for advice, there are sure-fire ways to know that you are being misled. Any of these should set off alarm bells:

  1. Now that you live abroad, you don’t have to submit or declare anything to Sars;
  2. Sars will never find you in another country;
  3. You automatically qualify for a DTA;
  4. You are seen as a non-resident if you have been outside of SA long enough;
  5. You must give up your passport and or dispose of all your South African assets;
  6. Sars is not asking for a tax residency certification.

These points seem rather mundane mid-conversation, but, once in effect, each untruth can have devastating financial consequences. Here is why:

Now that you live abroad, you don’t have to submit or declare anything to Sars

 It is a common misconception that Sars will forget or forgive transgressions. In reality, every stone gets turned over twice. While an uninformed consultant or advisor might sell clients on the idea that the tax regulating authority in their country will forget about expats, professional tax practitioners will stay up to date with current legal consequence. As long as you are a tax resident of South Africa, you must submit annual tax reports and declare additional income.

Sars will never find you in another country

 As per the Common Reporting Standards (CRS) and the automatic exchange of information, Sars receives information on offshore income and financial information of South African tax residents. If you have not been submitting tax returns declaring your foreign income, you will be seen as non-compliant and face harsh consequences. More so, if you do fill out tax returns and they do not correlate with the information Sars has been privy to, it could be seen as a criminal offence.

You automatically qualify for DTA

When it comes to taxation, you seldom qualify for anything by default. There will always be a submission process. It’s wrong to assume that being subject to tax in both countries automatically exempts you from paying tax in the country where you are not currently residing. DTA’s are a relief mechanism that must be applied and, so doing, “claimed” from Sars.  As such, they will almost always review or challenge every application for tax exemption.

You are seen as a non-resident if you have been outside of SA long enough

 Your tax residency status will never change unless you have applied and been granted that change. Even if you are a taxpayer who temporarily wants to cease your tax residency, there is a procedure to follow. Even if you have given up your passport, you will still be taxed in SA until you conclude a legal emigration process.

You can get permanent non-residency by way of a DTA

DTA non-residency needs to be claimed annually and there is no guarantee that you will qualify. In no way does it permanently alter your tax residence status. If you have no intention of returning to South Africa, then financial emigration is the only way to cease your tax residency. Then you can seek to obtain an emigration tax clearance certificate. However, if you are a taxpayer who is temporarily ceasing tax residency, you must still submit your tax returns for income generated in South Africa.

You must give up your passport and or dispose of all your South African assets

You do not lose citizenship by financially emigrating. You are also able to financially emigrate without being a permanent resident or citizen of another country. Furthermore, even if you cease your citizenship in South Africa, your tax residency status still remains. You can keep all your assets in South Africa after ceasing your tax residency.

In closing

When considering your foreign earned income, never forget the tax man in SA. Ensure you are complying with your new local tax jurisdiction and the South African one, as well as the income tax laws in both. Whether you plan to claim DTA relief or follow the financial emigration route to cease tax residency, it’s imperative to consult a licensed and professional service provider with a strong legal component. Ensure that you avoid finding yourself liable for a practitioner’s negligence and don’t fall prey to misleading advice. Remember, if the solution sounds too good to be true, it probably is.

Thomas Lobban, Legal Manager for Cross-Border Taxation, Reabetswe Maloi, Legal & Compliance Manager, Financial Emigration and Tax Residency. Victoria Lancefield, General Manager, Financial Emigration and Tax Residency at Tax Consultancy SA. 

COMMENTS   6

Sort by:
  • Oldest first
  • Newest first
  • Top voted

You must be signed in to comment.

SIGN IN SIGN UP

The SA tax brains, advisers to, are in the wrong job. The country is screaming for Leadership propelling it forward. Trying to scare, tax milk a generation, who left for better as B.E economics, is the opposite and a degrading sign. The only reason for the ones living a life outside S.A is trying to make a living, impossible at home. Coming home reasons are for most of them family, weather and country. Reading the article, they are the historical last hope for government S.A. Thanks to a perfect climate and beautiful country, downgraded to a den of thief’s.

Real wolves are called SARS !!

Nee man, if are comparing SARS to Wolves then it would be Wolves without teeth.

They hunt very small prey like you and me that pay our tax to the sent.

These Wolves are too scared to bite big and bring back the Tax money in Dubai and Pakistan.

True; more like hyenas and jackals than wolves.

There is a fine line that is overseen and administered by an array of self-appointed, self-interested custodians, each with full exposure to the entire rainbow of human nature, including the dark side. But only employed (or imposed) for essential self survival purposes (discretely with discarded ethics).

The message is clear: “With fair discrimination, EE and BBBEE, and a horde of other legislation, we do not want you. We want your money! You, we have run out of other people’s money”

End of comments.

LATEST CURRENCIES  

USD / ZAR
GBP / ZAR
EUR / ZAR
BTC / USD

Podcasts

INSIDER SUBSCRIPTIONS APP VIDEOS RADIO / LISTEN LIVE SHOP OFFERS WEBINARS NEWSLETTERS TRENDING PORTFOLIO TOOL CPD HUB

Follow us:

Search Articles: Advanced Search
Click a Company: