Tax warning for South African expats

 ·23 Nov 2023

South Africans living abroad are contending with a major shift in procedures from the South African Revenue Service (SARS).

Tax consultant Leap Group said that SARS has started flagging previously unsubmitted tax returns.

“This change is not arbitrary; it is based on third-party information received by SARS, which can include information received from foreign institutions through the Automatic Exchange of Information (AEOI) Common Reporting Standard (CRS) system,” the Leap Group said.

“This means that SARS might be accessing information about individuals’ financial activities from foreign institutions through international agreements. Consequently, they are flagging tax returns that have not been filed and where they have third-party information available to them.”

This concerns not only the flagging of returns but also how SARS assesses these fillings.

SARS assesses tax returns based on a person’s tax residence status in their system.

For those who have not formally ceased their tax residence but still submitted a return, SARS will evaluate them as a South African tax resident.

Thus, South African expats need to review their SARS profiles and their compliance status.

“The crucial first step is to assess if they meet the South African residence tests. Should they no longer meet these criteria, prompt cessation of tax residence before submitting any flagged returns becomes crucial,” the Leap Group said.

This situation also emphasises the importance of ongoing compliance even after ceasing tax

It is recommended that even after becoming a non-resident, individuals continue to submit nil returns, even if it is not required legally. This ensures that there are no issues with SARS and verifies the exactness of any third-party information received by SARS.

Emigrants can also cease their tax residency through the South African residence tests or the Double Taxation Agreement (DTA) in their current country of residence.

This step is crucial to ensure that tax assessments by SARS are accurate, align with the individual’s current tax status, and thwart possible tax liabilities and penalties.

“SARS’ recent actions underscore the need for immediate attention and vigilance. Even if an individual is certain of their non-resident status, failure to formally cease tax residence before submitting flagged returns could result in the assumption of tax residence by SARS,” the experts said.

With this in mind, Leap Group summarised what South Africans abroad need to do:

  • Review SARS Profiles: Log into their SARS profiles to verify tax residence status and flagged returns.

  • Assess Residence Status: Evaluate whether they meet the South African residence tests or qualify for cessation of tax residence through the DTA.

  • Cease Tax Residence (if applicable): If no longer meets the residence criteria, take necessary steps to formally cease tax residence before submitting any flagged returns (not only tick a box in previous returns).

  • File Returns Appropriately: Ensure that all returns, especially those flagged by SARS, are submitted accurately considering the individual’s tax residence status.

  • Seek Professional Assistance: Consider consulting tax professionals well-versed in international tax laws to ensure compliance and mitigate any potential issues.

“Ignoring or delaying action might lead to unwanted tax liabilities and penalties. South Africans abroad must take proactive measures to review their tax status and ensure compliance with SARS regulations to avoid any adverse consequences.”

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