It is estimated that more than 1 million South Africans have emigrated and are now residing offshore permanently. With these numbers rising daily, it makes sense that the South African Revenue Service (SARS) is taking an interest in expat earnings. This interest is increased by the fact that the majority of expats settled in the UK, Australia and the US which would mean they’d be earning in a much stronger currency, which has set off cash register sounds in the taxman’s ears.

Such interest has led to SARS adopting a new approach when it comes to investigating the compliance of expats abroad, and they are using all possible tools at their disposal, including social media to question their earnings.

Read: Tax Residency 101: Do I have to pay tax in SA if I work abroad?

Why is SARS targeting expats?

South Africa has a residence-based tax system, which means that SARS is entitled to investigate the compliance of all tax residents, whether living in South Africa or anywhere else in the world.

Tax residency is not automatically terminated by emigration, so expats still have an obligation to maintain their tax compliance with their home tax authority, until they are in a position to terminate their tax residency and become a non-resident for tax purposes. To SARS, expats can be ‘soft targets’ as they are likely to have misunderstood the nature of their tax obligations, particularly in light of tax rule changes in 2021 that ended the blanket exemption on foreign income.

Such incorrect interpretation of South Africa’s tax residency rules has resulted in increased tax non-compliance by expats – they either declare their income incorrectly or not at all. With this in mind, SARS has begun probing the disclosure of foreign income earned (or not earned) by both resident and non-resident taxpayers.

These inquiries are far reaching, and can extend to spouses, with SARS requesting that both provide supporting documentation to verify the declarations of the other, while querying possible non-disclosures. SARS is letting no detail go unnoticed, and no stone unturned in their quest to unearth undeclared income, specifically in the period of time between an individual’s last-known South African employment and the date on which they ceased to be tax residents of South Africa.

As such, to avoid potential SARS non-compliance penalties, expats are advised that:

• If they earned any income during their ‘in-between’ period, it must have been declared as they were tax residents in South Africa. Whether the income is local or foreign is irrelevant based on their resident tax status at the time.
• If they did not earn any income (either local or foreign) or they were unemployed during a relevant tax period, this must be declared to SARS, even if it is purely for the purposes of creating an auditable trail.
• Where a taxpayer has incorrectly not declared their foreign income to SARS, they may be liable for outstanding tax and potential non-compliance penalties and interest on outstanding amounts.
• Even worse, their tax residency status may be jeopardised and they will not be issued a non-resident confirmation letter by SARS until all non-compliance is corrected and all debt has been cleared with the revenue authority.

As SARS grows nosier and gets better at stalking, probing deeply into each individual’s financial affairs, examining each case according to its specific facts, it is strongly recommended that South Africans abroad clarify their tax residence status without further delay. It’s the only way to ensure that there is not a nasty non-compliance penalty from SARS looming in your future.

Who meets the definition of a tax resident in South Africa?

According to the Income Tax Act of 1962, SARS will consider people to be tax residents if they fulfill one of the two residence tests:

• The initial assessment considers the intention of the taxpayer to examine whether they are ordinarily resident in South Africa. If there is an intention to return home to South Africa at any point in the future, that person is a tax resident.
• The second assessment considers the amount of time spent physically in the country, and even if they have been confirmed as a non-resident, it is possible to become a resident again simply by virtue of the physical presence test.

Read: What happens when I do not declare foreign income if I have yet to cease SA tax residency?

SARS is now issuing Personal Income Tax Administrative Penalty notifications

If you have received a Personal Income Tax Administrative Penalty notification, this is because of a late return or non-submission of one or more Income Tax Returns. To fix the situation, you will need to submit your outstanding returns as soon as possible. Failure to rectify your non-compliance will result in a monthly recurring SARS admin penalty being charged until you are compliant.

FinGlobal: expat tax compliance specialists for South Africans abroad

Let FinGlobal assist you in gaining clarity on your tax residency status with the South African Revenue Service. Our team can ensure that you have met all your tax obligations, help you maintain full compliance, and avoid any unforeseen admin tax penalties. Hand over your tax headaches to us, and consider them sorted.

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