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Sars attack on South African taxpayers abroad

Should you financially emigrate?
Image: Moneyweb

The South African Revenue Service (Sars) has discovered R400 billion in offshore holdings owned by South Africans and is on the rampage to collect all taxes that it is owed on these assets.

This means that South Africans who are currently working abroad need to particularly take note and ensure that they are compliant with all of Sars’s tax requirements. Sars has also become more stringent in terms of collecting taxes from wealthy South Africans, who are trying their level best to avoid their local tax obligations.

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And thanks to technology and global collaboration between many countries, Sars now has the international capability to track and trace the global income and asset base of South African tax residents. Under the Automatic Exchange of Information (AEOI) agreement, which Sars signed up for in 2014, Sars now automatically receives all the information it needs regarding the foreign revenue streams of South African tax residents. This information includes the individual’s name, tax reference number, account number, account balance and the income generated from the account. It is the very access to this detailed information that has awakened Sars to the reality that R400 billion is currently held offshore by South African taxpayers.

As Sars now heightens its focus on collecting revenue from tax residents abroad it is essential to move quickly to formalise one’s tax residency with Sars, if you can prove that you are in fact a non-resident for tax purposes. Only in this way would your foreign income and assets be excluded from the net as Sars extends its reach to raise revenue from citizens living and working abroad.

Recommendations by Dennis Davis

Judge Dennis Davis, as part of the Davis Tax committee, provided recommendations which Sars is now following to ensure compliance and maximum recovery of tax revenue. In his recommendations, Davis expressed a view that Sars must audit high net worth individuals (HNWI), because Sars does not have all the necessary information on hand to tax them in full at the moment.

Read:
Tax evaders should face jail time to curb rising non-compliance – Judge Dennis Davis
Report to allow criminal prosecutions by Sars at ‘advanced stage’

It further became evident in Finance Minister Tito Mboweni’s 2021 Budget Speech that Sars is now placing a target on the backs of wealthy individuals and that lifestyle audits are going to be conducted and the information provided by the AEOI annually now provides Sars with the ammunition needed to launch this assault.

We have already seen Sars conduct more regular audits in an effort to recover revenue from South Africans earning foreign income and/or holding foreign assets. We anticipate that this will be further ramped up now that Sars is able to gain more accurate information regarding the financial position of individuals. This should be a concern for every South African, whether you are living abroad or in the country.

Seriousness of Sars

South African taxpayers must take note of the focused intent with which Sars is handling its affairs to broaden the tax base by collecting information from third parties worldwide.

Sars is already implementing measures to gather information regarding all foreign dealings by requesting the information directly from the taxpayer.

This includes requesting taxpayers to:

• advise why they did not declare their foreign assets;
• provide details of any offshore trust that they are a beneficiary of;
• provide a detailed statement of assets and liabilities to include foreign assets;
• disclose all bank accounts; and
• furnish a copy of your foreign residence certificate, emigration tax clearance and where applicable, EMP336.

Failure by the taxpayer to give the necessary information and reasons within 21 days is a criminal offence in terms of the Tax Administration Act.

How to protect yourself during the hunt and limit your tax liability

The good news is that South Africans working abroad can protect their foreign revenue streams and assets by ceasing their tax residency with the country by going through the formal process of financial emigration. However, this solution is only applicable to South Africans who have the intention to permanently live abroad. Indeed, the revelation that one’s worldwide income is taxable has led some, who have been unaware of their tax obligations and on the fence about returning to the country someday, to finally make the firm decision to not look back and take the step to financially emigrate.

If you decide to financially emigrate, you will become a non-resident of South Africa for tax purposes, and you will only be required to disclose South African-earned income and assets. Foreign income and assets will not have to be disclosed to Sars because worldwide tax responsibilities are relieved the moment one financially emigrates and becomes a non-resident for tax purposes.

Those who have financially emigrated maintain their South African citizenship but are simply free from the burden of paying tax on global income outside the country. It is therefore vital for South African expatriates to consider the benefits of financial emigration, as a revenue hungry Sars grows ever more stringent and aggressive in its bid to tax every cent that it is entitled to claim from taxpayers.

Reinert van Rensburg, attorney and financial emigration specialist. 

COMMENTS   58

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And yet, no arrests with the Zondo Commission costing close to R1 billion

This Government chases money to waste money

So, what to do after you collect the Tax?

The brain drain has happened and it’s irreversible, thanks to a dysfunctional ANC led Government

And South Africa got $4.5b for the Covid relief package from the world bank and where and what happened there? Any criminals been charged AND convicted?

There have already been arrests from Zondo commission so do your facts

Oh really? After R1 Billion and nearly 3 years later? There’s no end in sight..The so calledcommission is just another Parastatal in disguise..A cash cow.. They arrest the sardines to bluff the uninformed, much like you

We’re talking about the BIG fish, the Magashules and and his merry band of looters..The ones who stole hundreds of millions and billions, not those who stole parking money to buy bread

Wheres Mangaungs mayor of 6 or 7 years ago, what about Olly and the R250 million, what about……? The list is endless and i don’t have enough ink on my phone to name them

Rather comment when YOU have something worthwhile to comment abou!

Enlighten me.

All I’ve seen was the arrest of Agrizzi as a result of an SIU investigation, from 12 years ago.

‘Arrests’ mean nothing if criminals are not convicted/sentenced.

Is there sufficient political will to let the latter happen? Does the SA legal system has the legal clout to convict people, based on poor investigative work? The fat cat elite has the money to draw legal battles out.

‘Arrests’….pah!

Eish. A word of advice from an older man. Keep your mouth shut, you seem to have a nack of putting your foot in it.

They chose soft targets, normal law abiding citizens.

Is it true that Zuma has a mansion in Dubai? if true did he declare it?

What about Zuma’s son being fingered by Pakistani Banks? where did he get the money and how did he get it offshore? did he inform SARS?

Where is SARS?

Ordinary citizens like me get audited every year in case we did not declare R5.

Your comment is laughable to say the least. The arrests they’ve made is akin to arresting the tea lady employed at the Hilton for pinching a sachet of sugar. So please, save us the drama.
The big fish that plundered this country to smithereens will get away while this country is descending further and further into the abyss. And this so called “Zondo commission” – what do you think its really about? The government just wants to save face to prepare them begging for funds from the world bank and what have you. This country is on its last legs.

The game plan is, pursue tax income to the extent possible, widen the revenue net and use that money to pursue factional ANC battles i.e Zondo Commission and use some to buy BMX X7’s.

Why should there be arrests due to the Zondo Commission? It’s just there to terrorize Comrades and make sure they toe the line and make sure some leave the party.

At close range, is the President’s PA arrested for her involvement in the PPE saga? A whole PA,R80m tender.

I’m no fan of paying taxes to a corrupt and incompetent government but the headline of this article is pure click bait. Where’s the attack part? I mean besides enforcing the existing tax law.

Indeed. And the SARB’s “formal/financial emigration” process was abolished from 1 March 2021.

Now it falls back to the SARS rules of proving you’re a non-resident (for tax purposes) based on the Ordinarily Resident test (and the Physical Presence test).

Michael : If taxpayer did not assert it is non-resident, then not declaring all income here is the taxpayer’s problem, not SARS’s? For a while now there is a specific declaration on returns whether one changed residency. If Johnny did indeed become non-resident a while back (the excuse for the non-declared income), Johnny has a fatal penalty plus interest awaiting him unless he declared that deemed CGT and paid tax on it.

The time to change tax residency is when you are young and time that in tax year with little or no other taxable income.

Question : if Johnny moves to Canada in say 2022 tax year, but continues to earn income from SA sources ( some investment some as contractor working remotely), how does this all pan out tax-wise?

@ Johan_B

Re your Johnny question: what do you imply by “moving” to Canada? Is the move temporary, while Johnny’s immediate family remains in SA…OR..has he relocated with settled and certainty to remain in Canada, with no intention to return to SA?

Kindly provide clarity of the above first, please.

Johnny can either be regarded as a “tax resident” (irrespective of citizenship) in SA, or in Canada. One cannot be tax resident in both countries at the same time.
Normally Johnny would be taxed in his country of (permanent) residence, and would have to declare his worldwide income to the relevant country’s tax authority.

If Johnny still regards SA as his home he’d return to eventually, then his Canadian income would be taxable in SA, subject to the Foreign Income Exemption (the 183day/60-day rule), and will pay tax to SARS above the first R1,25mil annual exemption. Foreign tax paid will be taken into account.

Alternative, if Johnny made the decision to leave SA for good (i.e. emigration”) he’d have to declare on his next 2022 or 2021 return that he ceased to be a SA tax resident, and declare his “deemed disposal of certain local & foreign assets” as CGT event. The so-called “exit tax”. Then becoming a Canadian tax resident, he’d have to declare his SA rental property income, and any relevant interest & dividend income on SA investments to the Canadian tax authorities (as foreign rental income / foreign interest, etc)

Agree, the timing to change tax residency is more ideal when young, and having little asset build up as yet. But I have people in their 50’s also leaving SA, with certain build-up wealth.

Yeah, I meant if emigrate to Canada, certainly cease being SA tax resident.

Something weird : nowadays kids could emigrate and still work for an SA company. Maybe less likely (exchange rate) but it happens.

They wouldn’t keep SA property but maybe some investment income.

Shame on Reinert van Rensburg to use fear mongering to try and drum up business. Double taxation treaties between countries will also prevent you from being liable for taxes in South Africa.

So you do not beed to financially immigrate. The fact that this is NOT even eluded to in the article makes this poor report and bot work being published.

Agree. And Reinert describes himself as a “financial emigration’ expert. Since this process is now abolished from 1 Mar 2021, I ponder what is “financial” emigration” since it’s not supposed to exist.

Now I am confused…

It was widely reported from 1 March 2021 the following had come into affect..

The new financial emigration process will include:

A focus from SARS specifically on tax residency in terms of the South African tax residency tests;

– The application for an Emigration Tax Clearance Certificate, with supporting documents to prove non-resident status;

– An “exit tax” calculation on worldwide assets, in terms of section 9H of the Income Tax Act;

– A stringent audit by the SARS auditors and potentially by the dedicated SARS Foreign Employment team; and

Approval by SARS before any funds may be expatriated by an authorised dealer based on emigration.

These requirements negated the traditional need to apply for Financial emigration it was said.

You are not confused SuperNova. You are CORRECT.

Excessive taxation tends to have the opposite of the desired effect i.e. tax revenues fall. Expats will simply decide to stay or move on to another jurisdiction that does not discriminate on the basis of ethnicity. There are millions of South Africans who never emigrated but have no intention of coming back. In general, it is easy for Saffas to find work as they have a sought-after culture of diligence, competence and integrity. Know this: There will never be enough tax revenue for the ANC’s voracious plundering machine.

It’s time that the entire world’s tax authorities tackled tax havens.

How about we tackle the problem of just accepting taxes? It’s quite easily the worst form of spending ever.

WHEN THE GOVERNMENT IS DEAD BROKE, ALL THEY CAN DO IS TAX TAX TAX TAX TAX. THAT IS UNTIL THE ECONOMY CRASHES LIKE SO MANY OTHER SOCIALIST COUNTRIES. WE HAVE A BUNCH OF ON THE JOB TRAINEE’S IN “GUBMENT” AND THEY SCREWED THE COUNTRY

TSK!!!

The anc organized crime syndicate stole more than double the R400 billion.

No interest to go after that???

Oh I forgot. The scum infiltrated and captured SARS as well. This time just a different faction.

These “people”

SARS cannot determine that you are a SA tax resident if there is a double tax treaty in place. So if you move to e.g. France and become tax resident in France due to the definition in the DTA you are a French tax resident irrespective of how much noise SARS makes. The problem is that you are then liable for SA CGT on your worldwide assets as you will have ceased SA tax residence by becoming a French tax resident.

So proper planning is required. If your SA assets are held in a trust only your loan to the trust can be subject to CGT(zero as there is no growth) as it is an asset so you can still freeze your CGT cost albeit at the cost of deemed interest.( easy to avoid with units)

What clever SA folk are doing is financially emigrating and then living in SA for less than 183 days a year paying SARS…NOTHING ..except the once off exit tax on non trust held assets. Mauritius for instance is a favourite spot.

Also if your assets are in an offshore trust which was settled by yourself when you were not SA tax resident(or by a foreign settlor eg a child working in the UK) SARS gets nothing except if you have a distribution from the trust. If the trust guarantees a loan to you from a local bank that is not a distribution-its a loan so again SARS gets nothing until a distribution.

The people that were not declaring offshore income to SARS for years were unlikely to have declared it to the French either. Takes on email from SARS.

The way the world is heading, there is no hiding and there will be no such thing as an income that is not taxable anywhere. Nor should there be : free-loaders are pond scum.

You have a back to front take on it. From where i sit a freeloader is a government official abusing tax money for own interest

@Johan

There must be many (obscure..) countries still not part of the global OECD countries. For one, Georgia is not part of OECD, but heard that their aim to to eventually join. One just need to search for others.

Adding to Asitis’s comment: global citizens (especially the wealthy) have two views: on the one end, the wealthy will pay their taxes due, when a govt spend it for the betterment of its citizens, and by creating an environment for the wealth to strive as well….and on other extreme end, many wealthy are of the opinion that they created their own wealth, then why give it away to ‘thieving’ governments, hence placing their assets in tax havens. Many government border on being guilty of not abiding to the “social contract” between taxpayer and govt.

That’s why websites like that of Andrew Henderson’s Nomad Capitalist are so interesting to read.

https://nomadcapitalist.com/about/

Still can’t join the dots hey Johan ?

As many are saying, by paying tax you are feeding the very entity that is out to destroy you.

They call it cognitive dissonance.

SARS has been threatening for years now about offshore money. No meaningful action yet. I doubt they have the capability to successfully pursue it.

in normal course of events you are probably correct.

BUT if you get reviewed by a person instead of the system, guaranteed SARS flies off a FATCA / AEOI request.

There is no client that is worth the bank losing US banking license whether direct or as correspondent bank. Your foreign institution will give SARS everything. As they should.

I pay more tax because of all the free-loaders. Stuff that. Tax fraud because of our corruption is not an excuse. If you have that moral fibre, declare your income and refuse to pay it or pay it to NSRI or SPCA. Don’t hide it in a lawyer trust account in a tax haven. That makes you as corrupt as Zuma.

Johan, you living in a fairy tale world, cocooned in your cognitive dissonance.

Tax here long ago lost all and any relative purpose.

It’s now clearly a case of them against us.

Keep feeding the crocodile Johan, you are only making your enemy stronger.

And when that crocodile gets so desperate that after plundering your pension he comes for your house and car, keep thinking about your fairy tale wish of ‘doing the right thing’ chum.

Small problems with changing tax status:

1. Your final act is deemed disposal and the related liability for CGT. Whether you do it now or pretend you did it years ago, the liability stands.
2. So you convince SARS that you owe them nothing because you changed tax residency in 2015. Did you declare that income to you new tax authorities? SARS will ask

Article was written to promote financial non-residency, by someone who is selling this service. This article should’ve been labelled as “sponsored”.

There has to be numerous downsides to financial non-residency, but this isn’t mentioned.

Zondo has already resulted in arrests and more on the way so do some fact checking.

Another article by somebody who stands to gain by doing this. Where is the disclaimer?!

I see the ANC shills only come out for certain articles now. Things must be tough at Luthuli House.

No shill for the slothful ANC, but @Dadape is correct on both counts.

Arrest means bugger all. NO Convictions !!!!

The arrests related to the Free State asbestos saga of R 255 million and Sodi, Mokhesi, and Thabane Zulu were arrested no prosecutions to date and yet a whole bunch of ANC cadres are implicated in other dubious deals with no arrests – seems we have an inept justice system in operation

Another indoctrinated statist that believes ‘government is on his side’

Hahahahahaha……

In the mean time why don’t you go and feed your minotaur and unicorn.

How funny is that? And good luck with that. As an aside, R400 billion is a fraction of what has been stolen by the ANC, its cadres and hangers-on over the years – that is the low hanging fruit ripe for harvesting, but it is politically safer to target those perceived as “wealthy” (and any upper middle class person at retirement with a unbonded house, a car or two, assorted loose assets and a pension will qualify as a so-called “HNWI”). I suspect that most of what is alleged to be held abroad are assets of those South Africans who have left the country but who never emigrated officially – they just departed and, before and after departure, took with them whatever they had. Some have taken citizenship abroad but did not bother to seek prior approval for dual citizenship from the South African government so, on paper, they are still South African citizens. They should in theory submit tax returns and pay tax here, but they do not and will not. I have family, friends and colleagues living and working overseas who are in exactly that position. Not one of them went through the emigration process. What is their attitude to all of this? SARS, Davis and company can take a flying leap. Are they going to try to extradite them for prosecution in South Africa or try a civil “debt” recovery abroad? As long as these people are tax compliant in Australia, New Zealand, the UK, Canada, the USA, etc., courts there will send SARS packing with a roar of laughter.

Agree 100%. Only thing SARS can really do, is to determine the year of ceasing to be a SA tax-resident, and demand that “exit tax” be paid, back-dated to the relevant past year..being the “deemed disposal of your SA and worldwide assets, upon emigration” rule.

So SARS can (try to) do Estimated Assessments and run up a nice assessed tax debt owed by taxpayers, but it the collection of that from (already) non-residents that’s going to be a problem.

Yes, SARS can try assistance from OECD countries, but if the rest of the world come to realise the SA govt is merely on a desperate witch-hunt (using SARS as tool) to collect from long-gone non-residents, it’s not going to get much sympathy from those other OECD jurisdictions.

If SARS has the forex and time to pursue individuals In foreign jurisdiction then it will

Endless court adjournments such as in Brazil, see’s it signing off as the “big fish that got away”

Reinert van Rensburg, attorney and financial emigration specialist, goes on my list of people never to do business with.

Mr Magnus Heystek is on mine. He quite correctly interpret stats to show very slim returns in SA, but timing is everything – – – – – – – – –

“Buy in Mauritius(let our office there help you chose a property) Then, as I know from two cases, try and sell your Mauritian property for anything close to inflated purchase price – no buyers, agents only interested in selling ‘new’ developments to boost chances of getting Perm Visa.
Also – – “move your funds offshore” – – may sold with JZE low and converted to High US$ – – – – – only the ‘AGENTS” score fees – scared people lose.

What nonsense from a “specialist”. The government is dismantling our existing exchange control regime. In its place we will have a cash flow management system that does away with the concept of financial emigration and instead introduces a verification process based on tax residency.

You cannot “Financially/formally” Emigrate anymore. The process is now simpler.

Just declare on your ITR12 Individual tax return that you “ceased to be a SA tax-resident within this tax year” by clicking on the “X” in the standard questions field.

The CGT-fields will programmatically open, where you’d have to declare your “deemed disposal of your SA & foreign assets, upon emigration”. This excludes real estate & ret funds…so presume it mostly relate to your share or unit trust/discretionary investments.

Pay the CGT tax, and then you’ve placed on record with SARS that you became a non-resident. Give SARS perhaps another nil/non-resident return in the subsequent year, but Indiv tax returns hereafter will not be required. Just declare your SA rental & interest/dividend income (if applicable) in your foreign country of residence.

I dare you…even leave zeros on the CGT fields…make it SARS’ problem to find figures. Chances are that the current SARS staff will have no clue either what to do, and finalise their audit.(?)

Are you sure that you will not be taxed by SARS on any income earned (profits)in SA, such as rental income, even if you have “financially emigrated” or marked the box as “ceased to be a tax resident within this tax year”?

I was under the impression that only your foreign income would be exempt from SA taxes, but any SA income would still be subject to SA taxes.

@Lance. At the end of the day, the “resident based taxation” rule applies. If the person became a tax-resident of another country (i.e. emigrated for good), then he/she will have to declare his/her worldwide income to the new country of residence. That includes income from SA (like rental property, local interest & dividends from investments).

One cannot be tax-resident in both countries at the same time.

Unless if one moves abroad on a temporary basis (with the intention to return to SA one day), then you’re a “SA tax resident temp abroad”, and your foreign income will be taxable here in SA, albeit subject to the R1,25mil “Foreign Income Exemption” based on the 183day/60-day rule.

It depends thus to which country the taxpayer considers (and can prove it) himself as a tax-resident.

Some people will literally sit on the couch eating junk food, watching Netflix and playing video games all day, then have the nerve to vote for the ANC and say “tax the rich”

Note to self: “Research KFC franchises…”

Trusting you have sought assistance from your counterparts in Dubai, “comrade”?

Just say nothing. Whatever you do don’t confess.

Note that the Zondo Commission has unearthed quite a few comrades who have received bags of R200 notes from the Gupta Palace yet SARS looks elsewhere. Obviously SARS has been instructed to back off cadres and comrades and to concentrate efforts on the ordinary PAYE and VAT taxpayers.
Some cadres have received so much cash that they need vaults to stash the “gifts”.

Yes I am scared of this new attack. Why? I do not have millions overseas, but i do have a small sum overseas. It does not generate any profits. Why do I bother? Because this greedy, unfair, corrupt government promotes occupation of land and property and I fear being left homeless and destitute. I am 74 years old and live in a working class complex

People do not mind paying tax as long as the collected tax is used properly.

It becomes a problem when the tax money is looted and/or never recovered.

The ANC has waged a brutal war against skilled and wealthy – the 2 go hand-in-hand – citizens and will be the ‘loser’ when the dust has settled.

Question for SARS:
Does Dubai fall under the term “Abroad” or is it province in SA?

End of comments.

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