A look at the Budget Speech Review - 2020 issued on 26 February 2020 by the National Treasury, and changes are expected in little under 5 months. Has Covid delayed these changes? Nothing has been mentioned in the press, but with SARS upgrading its own systems up to 1 September 2020, it is reasonable to think they will meet their target date.
Many South Africans live abroad and at some stage will need to clarify their tax profile status on SARS e-Filing. Are they merely ‘dormant’ on an e-Filing system or have they tax emigrated? The former suggests that they are still considered South African Tax Residents. This assumption has income tax and capital gains tax implications, sometimes even a risk of double taxation…
Some feel they can simply ignore their tax standing, and that the South African Tax system will not catch-up with them. Please find out more about ‘South Africa participates in the automatic sharing of information between tax authorities on individuals’ financial accounts and investments.’ This can be found in the Budget Speech Review.
In truth, the onus of proof always rests on the taxpayer. Does he have enough to prove that he is non-resident for tax purposes… This can become a costly exercise and certainly requires a fair amount of disclosure. As the years pass, it is difficult to remember all, or know what is currently reflected on SARS system under their names… In addition, consider if Income Tax returns were completed correctly to match intention surrounding residency?
The concept of emigration as recognised by the Reserve Bank will be phased out… but SARS are still very present, because tax emigration triggers a capital gains tax event. Did you know that the SARS tests for tax emigration are similar to those required for a South African to transfer money abroad? For one, you are looking to move all your wealth ‘offshore’ and the other – and amount of up to R10m. They also both offer a Tax Pin from SARS, when the process is complete…
With mention of the phase out of the Reserve Bank, a more stringent verification process is suggested. A risk management test is expected. This will look at:
· the individual being tax compliant,
· a certification of the source of funds, and
· assurance that the source of funds complies with anti-money laundering and countering terror financing requirements.
For most emigrating South Africans, the above is already required. One can only anticipate SARS systems being better integrated within South Africa and around the world.
One can suspect that in 5 months-time, the new system will be formalised and thereafter, many South Africans living abroad will be asked to clarify their tax residency status. The CGT event on formal tax emigration might catch them unawares, and should they not be able to prove their emigration date, might have some of their foreign earned wealth subject to South African tax.
If your intention is to leave South Africa permanently, then tax emigrate. That way, you hope to deal with one tax authority only…and keep your tax affairs as clear and simple as possible.
I always remember my Tax Professor stating that there is nothing fair about death or taxes.
Due date for phase in - 1 March 2021
Are you prepared?
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