South Africans living abroad are facing a significant shift in procedures from the South African Revenue Service (SARS). This change comes with a warning for expats regarding their tax compliance.
South African Tax: Cross-border Sharing of information with SARS
This change is based on the focus by SARS’ on expats tax affairs and informed by third-party information obtained by SARS. Consequently, SARS may have access to details about individuals’ financial activities from foreign institutions.
As a result, they are identifying expats with outstanding South African tax returns that have not been filed and are issuing letters of demand for non-compliance.
Issuing of SARS tax returns
The flagging of outstanding tax returns is not the only concern for South African expats. SARS also assesses these filings based on a person’s tax residence status in their system. This means that if an individual has not formally ceased their South African tax residency, SARS will assess individuals as tax residents of South Africa.
Reviewing SARS compliance status
It is crucial for South African expats to review their SARS profiles considering this new development. The first step is to assess if they meet the South African residence tests. If not, it is crucial to promptly cease tax residence before submitting any flagged returns.
Importance of deregistration from SARS
Even after ceasing tax residence, it is recommended that individuals continue to submit returns should they earn any income from a South African source. Should there be no assets left behind in South Africa, and tax residency was ceased, an additional step is required to deregister from the SARS system. This will ensure that you are off the SARS radar in the future.
SARS tax residency cessation
Emigrants have the option to terminate their tax residency either by meeting the South African residence tests or by utilising the Double Taxation Agreement (DTA) in their present country of residence. This is crucial to ensure that tax assessments by SARS are accurate and align with an individual’s current tax status.
Steps to take
In summary, South Africans abroad need to take immediate action considering SARS’ recent focus on expats. This includes reviewing their SARS profiles, assessing their residence status, and taking necessary steps to formally cease tax residence if applicable. It is also essential to file all South African returns accurately in lieu of third-party information that may be available to SARS.
Whilst having any financial affairs in South Africa, maintaining a positive relationship with SARS is important to ensure the smooth transfer of any funds from the country in the future.
FinGlobal: cross-border tax specialists for South Africans
If you’ve recently emigrated and you’d like to minimise your risk of double taxation in South Africa, FinGlobal can assist with expat tax compliance, tax emigration, tax refunds and everything else you need to stay on the right side of SARS.
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