SARS is making it harder for taxpayers to cut ties: expert
South African taxpayers seeking to become non-residents are being rejected for contradictory and inconsistent reasons, says Thomas Lobban, the head of individual cross-border tax at Tax Consulting SA.
Lobban said those seeking to be a non-resident for tax purposes must be prepared for an increased likelihood of rejection.
He said that those who get rejected are, however, still able to get approval if they follow the correct procedure.
“The taxpayer can, where appropriate, request that South African Revenue Service (SARS) review its decision and carry the application forward on the correct basis,” Lobban said.
SARS cannot delay or reject a matter without good and lawful cause where you are compliant and qualify to cease your tax residency, he said.
According to Lobban, this seems to be the situation being played out with an increasing number of non-resident applications.
Even where there is no legal reason for SARS to reject an application, it still happens, he said.
“Examples that we have seen include rejections on the basis of requested information not being submitted even when it was, or a rejection on the basis of a deadline that has not yet passed, among many others.”
The image below shows a sample of what a rejection letter from SARS could look like:
To counteract this move by SARS, emigrating South Africans should try to minimise as many reasons for rejections as possible, Lobban said.
Victoria Lancefield, the director of expatriate tax and banking engagement at Tax Consulting SA, said that ceasing tax residency is a tight process with only 21 days to prepare.
She further noted that to be in the best position, a person should take care in the following areas:
Financial review
Taxpayers should identify and detail their worldwide sources of income; an entire portfolio of local and foreign assets; all financial and tax structures, such as trusts, business entities or beneficial ownership arrangements; and any other relevant financial details of which SARS will likely be aware through global third-party data sources, said the director.
“This step will protect applicants from being rejected on the basis of not being forthcoming and transparent about their wealth.”
Tax diagnostic
According to Lancefield, a tax diagnostic is a preparatory step that queries the taxpayer’s standing with SARS but, being a fairly automated and typical exercise, does not trigger any audit on them.
Taxpayers will review their tax status to ensure they have fully disclosed their worldwide wealth, that their tax submissions are up to date, that their account balance is paid up, and that they are not otherwise non-compliant.
“A preliminary check-up of this nature is critical to ensure you can correct any non-compliance that would result in rejection before making your official submission,” she added.
Informing SARS
An aspect of announcing SARS that one is ceasing tax residency is done by completing a Registration, Amendments and Verification (RAV01) form on eFiling or by appointment at a SARS branch and, at this point, SARS becomes directly involved in the process, Lancefield said.
Because the RAV01 is used for other purposes apart from ceasing tax residency, and SARS published a 54-page manual on completing it correctly, taxpayers must be particularly careful when doing so.
“An incorrect RAV01 is a good enough reason to reject the application before it ever gets off the ground,” said Tax Consulting SA.
However, inconsistent and unreasoned rejections are making it extremely difficult for taxpayers to follow the process in an efficient, timely manner.”
“We have noticed a trend of what could be seen as delay-by-rejection tactics being employed in certain cases, so we advise those ceasing tax residency to be extra diligent and thorough when applying.”
Read: Red flags for taxes in South Africa – what to expect this week
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