Few things are more unsettling than discovering that your South African bank account has been frozen or that money has unexpectedly disappeared from your account.
As the South African Revenue Service (SARS) continues to strengthen its debt recovery efforts and improve SARS tax compliance, more taxpayers are finding themselves on the receiving end of collection action. For South Africans living abroad, this can be particularly stressful if you still rely on a local account to manage investments, pay expenses back home, or support family members in South Africa.
The good news is that, despite the South African Revenue Service’s significant powers to recover unpaid taxes, these powers are not unlimited. Understanding the difference between a frozen account and money being deducted from your account can help you better understand your rights and your options.
Top three takeaways for South African expats on tax compliance
- SARS may be able to recover outstanding tax debt directly from your South African bank account. If you owe SARS money, the tax authority may instruct your bank to pay funds directly to SARS to settle the debt. This can happen even if you’re living overseas and using your South African account for day-to-day expenses or investments.
- A frozen account and a deduction from your account are not the same thing.
Many taxpayers use these terms interchangeably, but they involve different legal processes. Understanding which action SARS has taken is important if you want to challenge it. - Staying on top of your tax affairs is your best defence. Keeping your tax affairs up to date through South African Revenue Service eFiling and understanding your South African expat tax obligations can help you avoid unpleasant surprises.
Read more: SARS tax recovery rules explained for South African expats.
Can SARS freeze your bank account?
The short answer is yes, but this is not the same thing as deducting money from your account to settle tax debt.
A frozen account generally means that access to some or all of the funds in the account has been restricted. This typically happens in more serious situations where SARS believes there may be a risk that assets could be moved or disposed of before an outstanding tax debt can be recovered.
A frozen account can have serious consequences, preventing you from accessing funds needed for everyday expenses, business operations, or financial commitments. Fortunately, this type of action is relatively uncommon.
The more common scenario: SARS deducted money from your South African bank account
In most cases, what taxpayers experience is not a frozen account but rather a deduction from their account through a process known as a third-party appointment. Under South African tax legislation, the South African Revenue Service has the authority to appoint a third party, such as your bank or employer, to pay money directly to SARS to settle outstanding tax debt.
This means your bank may receive instructions from SARS to transfer funds from your account to the tax authority. For many taxpayers, the biggest shock is that they only become aware of the issue after the money has already been deducted.
This can understandably feel as though the account has been frozen, particularly if the deduction leaves insufficient funds to meet other financial obligations. Legally, however, these are two different collection mechanisms.
Read more: SARS-related queries 101 – your guide to contacting SARS from overseas.
Does collection action mean SARS is automatically correct?
Not necessarily. Many taxpayers assume that once SARS has taken collection action, there is nothing they can do. In reality, taxpayers still have rights and protections under South African tax law. If SARS has deducted funds from your account or restricted access to your money, you may be entitled to:
- Understand exactly why the action was taken
- Request details relating to the outstanding tax debt
- Challenge an incorrect assessment
- Dispute collection procedures that may not have complied with legal requirements
- Seek relief if SARS acted outside the scope of its powers.
Importantly, disputes about tax assessments and disputes about collection actions are often treated separately. You may be challenging the amount of tax that SARS believes you owe, while SARS continues with collection efforts at the same time. This is one of the reasons why obtaining professional advice quickly is so important.
Read more: How long does SARS take to respond to disputes?
Why South African expats can be particularly vulnerable
Many South Africans assume that moving overseas means their South African tax obligations automatically come to an end. Unfortunately, this is not always the case.
Your liability for tax in South Africa depends on factors such as your tax residency status, whether you continue to earn South African-sourced income, and whether you have formally ceased South African tax residency.
This means you may still have obligations relating to
- South African tax for expats
- Local investment income
- Rental income from South African property
- Declarations relating to foreign income tax in South Africa.
When returns are not submitted, or tax residency status has not been regularised, penalties and interest can quickly accumulate, increasing the risk of collection action.
Read more: What to do if you owe SARS money – the expat’s guide to tax debt.
What about penalties and non-compliance?
Apart from recovering unpaid taxes, SARS may also impose penalties where taxpayers fail to meet their filing obligations. For example, taxpayers may receive an administrative penalty assessment notice for outstanding returns or face additional charges in the form of a SARS non-compliance penalty.
In more serious cases involving deliberate misconduct, tax evasion penalties in South Africa can be significant. The good news is that most tax issues become far easier and less expensive to resolve when they are dealt with early.
Read more: Under-declaring foreign income abroad? How expats might be unknowingly exposed.
What should you do if SARS has taken collection action?
Whether your account has been frozen or money has been deducted from it, the first step is not to panic. Instead, you should:
- Review any correspondence issued through the South African Revenue Service eFiling.
- Confirm the amount involved and the reason for the action.
- Determine whether the underlying tax assessment is correct.
- Establish whether the correct legal procedures were followed.
- Seek professional advice if you’re unsure about your rights or obligations.
When it comes to SARS debt management, acting quickly can often prevent further disruption and help you reach a solution sooner.
FinGlobal: cross-border tax specialists for South African expats
Staying on top of your South African tax affairs from abroad can feel overwhelming, especially when SARS collection action or compliance issues arise unexpectedly.
Whether you need help with tax emigration, ongoing tax compliance as an expat, retirement annuity withdrawal, or international money transfers, FinGlobal’s team of cross-border specialists is here to make the process simpler and less stressful.
To find out more about FinGlobal’s convenient tax and financial services for South Africans living abroad, simply leave your contact details below, and one of our consultants will be in touch.