Sayonara to Tax Free Earnings

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Sayonara to Tax Free Earnings

The proposed amendment to section 10(1)(o)(ii), the exemption section referred to often as the so-called 183-and-60-day rule aims to limit the current tax-free earning situation of South African tax residents working abroad.

Under the current regime, taxpayers who are resident in the Republic and earn an income under a foreign flag, are exempt from paying tax on that income under 183-and-60-day rule. The proposed amendment aims to remove this exemption for taxpayers who are not taxed in the country in which they render their employment services.

There is currently no certainty as to when the proposed change will occur, given that it was announced at the 2017/2018 budget speech by current Finance Minister, Pravin Gordhan and there has, thus far, been no invitation for commentary by the public. More importantly, will the date promulgation of the amendment and the effective date differ? Will SARS apply the change retrospectively as it so surreptitiously did with employee relocation allowances?

In future, on the anticipated law change, an employee will need to prove that the income received for employment services abroad was taxed in the country in which the services were rendered. Without being able to prove this, the employee would not enjoy the benefit of the current tax exemption. On a side note, this will only be in reference to income tax on the employment income and not VAT, dividends tax or corporate tax.

Where the taxpayer remains tax resident, South African expatriates abroad must accept that the days of earning completely tax-free are over. Naturally, with the correct expert advice, avenues can be sought to reduce the impact of this proposed amendment.

Naturally, we await progress with eager anticipation and will keep our clients abreast of any news hereon.

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SARS to Exchange Tax Information with over 50 Jurisdictions

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SARS to Exchange Tax Information with over 50 Jurisdictions

The South African Revenue Service (SARS) has committed to the automatic exchange of tax information with the revenue authorities of over 50 other jurisdictions under the Organisation for Economic Co-operation & Development (OECD) Common Reporting Standard (CRS) by September 2017.

This international initiative goes hand-in-hand with SARS’ proposal to close the tax net on South African expats, many of whom have simply stopped starting submitting tax returns, completed zero tax filings and / or otherwise not complied with income tax and capital gains tax rules.

Banks will be required to provide to SARS financial information which includes: interest, dividends, account balances, income from certain insurance products, sales proceeds from financial assets and other income generated with respect to assets held in the account or payments made with respect to the account. This links back to South African passports, which create the reporting obligation.

Tax Residence in South Africa or in another jurisdiction will also form part of the CRS disclosure. This may include providing proof of foreign tax residency and, according to Marius Engelbrecht, our lead tax partner on personal tax compliance, we have seen a number of accounts being closed where the taxpayer appears to have been non-compliant.

He recommends the initial step is always to establish your current SARS compliance and according to latest statistics, only between about 25% of expatriates that ask us to check their status are fully up to date and compliant.

President Jacob Zuma Signs Bills Into Law

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The following Bills were promulgated and signed on 11 January 2017 by President Jacob Zuma:

  • The Taxation Laws Amendment Act;
  • The Tax Administration Laws Amendment Act, 2016;
  • The Rates and Monetary Amounts and Amendment of Revenue Laws (Administration) Act, 2016; and
  • The Rates and Monetary Amounts and Amendment of Revenue Laws Act, 2016.

Several changes have been made to various sections which are now applicable.

eFiling Profile Hacking

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VISIT YOUR NEAREST SARS BRANCH TO VERIFY CHANGES TO YOUR PERSONAL

Some taxpayers recently received messages from SARS about the changing of their personal details. If you received this message (and to ensure that the resultant changes are not fraudulent) you are kindly requested to visit your nearest SARS branch as soon as possible with the following supporting documents:

  • Valid original or temporary Identification Document (Green ID book / new ID card / Original Passport/ Driver’s Licence) and a certified copy thereof;
  • Original stamped bank statement not more than three months old that confirms the account holder’s legal name, bank name, account number, account type and branch code, where applicable, or where a new bank account was opened in the past 30 days and a bank statement cannot be produced, an original letter from the bank not older than one month on the bank letterhead with the original bank stamp reflecting the date the bank account was opened;
  • Copy/original proof of residential address or completed CRA01 in the case of proof of residential address that is in the name of a third party; and
  • Power of Attorney in the case where a registered tax practitioner/representative visit the branch to request the stopper to be lifted on behalf of the taxpayer.

For enquiries, please call the SARS Contact Centre on 0800 00 7277.

Guide: SVDP Version 1.2

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A draft guide on the special voluntary disclosure program was issued and deals with the time frame as well as the relief offered to taxpayers on international un-declared assets.

For access to the entire guide, please click here.