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South African’s abroad: Know your tax affairs 

If you are working abroad and have not formally ceased your tax residency, you are legally required to submit tax returns every year declaring your worldwide income.

Incorrect information and advice from tax practitioners, or in some cases South African Revenue Service (Sars) officials, has resulted in the misunderstanding of complex South African expatriate tax legislation, which has landed many South African in deep water with Sars.

This has led to many expats being under the incorrect impression that their tax affairs are in order, as a tax practitioner is handling their financial matters.

However, often further investigation reveals that tax submissions are in many cases incorrect, or at least partially so. This could lead to serious legal implications with Sars, should this not be rectified.

Common misconceptions 

Many expats are informed that should they meet a simple days-test (183-61 days) they are no longer required to file tax returns or do not need to declare their foreign income in South Africa. Many expats have therefore been incorrectly filling returns showing only South African sourced income; zero returns or in severe cases not filling returns at all.

If you are a South African working abroad and have not formally ceased your tax residency you are legally required to submit tax returns every year declaring your worldwide income. Should you then meet the requirements of section 10(1)(o)(ii) of the Income Tax Act No.58 of 1962 you will be able to exempt tax on your foreign earnings.

This section states: 
• 10(1) There shall be an exemption from normal tax- 
• (o) on any form of remuneration- 
• (ii) received or accrued to an employee during any year of assessment by way of any salary; leave pay; wage; overtime pay; bonus; gratuity; commission; fee; emolument or allowance, including any amount referred to in paragraph (i) of the definition of gross income in section 1 or an amount referred to in section 8, 8B or 8C in respect of services rendered outside the Republic by that employee or on behalf of any employer, if that employee was outside of the republic-
• (aa) for a period or periods exceeding 183 full days in aggregate during any period of 12 months; and 
• (bb) for a continuous period exceeding 60 full days during that period of 12 months 
• And those services were rendered during that period or periods

Meeting these requirements will afford you a full exemption on all foreign earned income during this period. However, as of March 1, 2020, an amendment made to section 10(1)(o)(ii) comes into effect, this places a R1 million cap per annum on the exemption. Thus, foreign income earned exceeding this cap will now be subject to tax in South Africa.

Sars won’t find out 

As of June 2017, South Africa joined the Common Reporting Standard (CRS), this was created to combat tax evasion and is the sharing of tax and financial information on a global scale.

Currently there are 97 countries who have already joined the CRS, which includes the European Union; United Kingdom; Australia; Canada; China; Kuwait; New Zealand; Qatar; Saudi Arabia and the United Arab Emirates. Thus, all your global earnings are now being shared from various financial institutions and revenue authorities globally.

This includes:

• Names, addresses, tax numbers and identification numbers relevant to place of birth.

• Bank account numbers.

• Account balances for the relevant calendar year.

• Any capital gains acquired from the sale of properties or investments.

Therefore, when Sars cross references the information they are receiving from the CRS with what you have declared on your tax returns and the two do not align, expats could face implications ranging from penalties to criminal prosecution for tax evasion.

Solutions

Be prudent in your approach to your tax affairs, explore your options and don’t take any information at face value as ignorance is not a valid or legal defence. Seek professional advice from experts in the field of expatriate tax law and ensure that you understand the requirements that affect you.

Nicolas Botha, tax diagnostic and financial emigration specialist at Financial Emigration. 

COMMENTS   18

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I only ever expect to pay for services that I use. So if I do not use the services of the country, it should not be entitled get any taxes from me. I view this as extortion and will be seriously considering financial emigration in this case.

If you take the plunge and leave the only real cost is CGT as it will be a deemed disposal of assets. Except property. However if you are leaving why keep sa assets. .that is an emotional decision. So rather sell up and pay the cgt and move on. Remember assets in a trust correctly structured can avoid this deemed disposal but with other side effects. Good advice is vital.

You are correct, there is no benefit for being liable to pay tax to South Africa. I will find the correct people to speak to to to absolve myself from this abusive relationship.

You are already paying and getting nothing. The crooks are buying 100k carpets and braai areas.

So my kids left SA 1 year after graduation for a holiday. Registered for and paid SA tax for ONE year after graduation

Left for offshore 10 years ago and have never worked in SA again.

So they are subject to SA tax?

Not if they are a NON TAX residents. Google SA tax residency test and check.

I read the “Tax and non-residents” page (Sars website) which is a summary of your suggested documents. These seem to describe South African citizens and don’t exclude foreign citizens (this distinction seems irrelevant). You have “formallly register” (my words) not just “make a declaration” (your words). I don’t know if this involves formal renunciation or termination of citizenship, but it seems irrelevant. Remaining assets like shares and real estate are still subject to capital gains tax and estate duties.

You have to formally register as a tax non-resident. You can only do it after 5 years of living abroad, even if you are student and haven’t paid tax in your life!

USA and Eritrea are the only countries that demands foreign tax of its citizens. I suppose this is Squirrel’s investment drive at work: my way or the highway!

Incorrect Jans. What you’re thinking of are the Reserve Bank rules. The Income Tax rules work completely differently and your residency is a question of law, not declaration. If you want a more detail, google “Interpretation Note 3 residency” and “Interpretation Note 4 physical presence.”

I read the “Tax and non-residents” page (Sars website) which is a summary of your suggested documents. These seem to describe South African citizens and don’t exclude foreign citizens (this distinction seems irrelevant). You have “formallly register” (my words) not just “make a declaration” (your words). I don’t know if this involves formal renunciation or termination of citizenship, but it seems irrelevant. Remaining assets like shares and real estate are still subject to capital gains tax and estate duties.

I did in fact mistakenly read the “physical presence” test backward. You are a non-tax resident after 330 days abroad, effective from the day you leave (not 5 years). You remain so until you spend more than 91 days per year back here for the year being assessed, and/or more than 91 days for each of previous years and/or 915 in total. Which is strange because you can return after 2.5 years abroad and remain non-resident for 2.5 years (assuming you did the formal procedure). But this must be the law that is changing because why you would be taxed for R1 mil. and over then. If this proviso is kept it seems like a narrow band of high value individuals will be forced to stay away for a thin, subtracted fraction of their rolling income.

(Sorry for double posting).

Reminds me of my ex. Happy to see the back of me but still wants my money.

It’s easy enough to declare everything and see what the tax trolls say you owe them. We’re going to have to move to Lesotho if you want to own a business in more than one country (Wikipedia).

Is CRS just crazy or does SARS not understand it? You can easily get doubly or triply taxed if their website is to be believed. There used to be bilateral treaties to split tax (which SA never bothered with). Now there are bilateral “Double Taxation Agreements” to stop every country from taxing you in every other country (which SA will not bother with). How is it my friggen problem we have the most useless diplomats in the world?

Jans, do you just enjoy trolling? We already are signed up for over 140 DTA’s. If you’re going to whinge, at least do it on an informed basis…

Sorry to whinge. But I don’t think those apply to taxing foreign income by local tax residents. If you’re a tax resident in 3 countries, which of countries 2 and 3 get the surplus tax of income earned in country 1? Your tax will balloon while a trilateral treaty is divised for this fringe exception. You face extradition and incarceration.

That would be a real case scenario if any other country in the world passes this ludicrous law. Even the only other civilised country USA that implements this has extensive treaties to deal in-house with each other’s citizens with a dedicated foreign tax emissary. Others limits taxation to repatriated dosh.

Is the article conflating Financial Emmigration with tax residency?

RSA expats need to take this article seriously … and to understand several “unintended consequences” of their failure to act correctly. The BIG problem is a common misunderstanding of the Tax Residency rules reading the term “ordinarily resident” – so studying the Interpretation Note 3 [currently dated 20 June 2018] is essential.

Far too many South Africans simply “relocate” to other countries without considering [or better taking professional advice] on what consequences there may be on 3 separate “residency” issues – Tax, Exchange Control and Citizenship. All three have nasty unintended consequences when improperly considered and applied!

I completed MP366B form are received excon clearance and no. I have lived and am resident in Europe since 2000 as are my family. My kids are naturalised. I cut all ties with SA, financially and asset. I have not submitted a return for 18 years and eill not be doing so.

I have never worked in SA and is not registered for tax. I do not meet any of requirements to pay tax.
I have lived in Asia for 14 years.

Should I register for tax. Both SARS and my accountant said no.

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