High-net-worth individuals (HNWIs) will remain in the crosshairs of the South African Revenue Service (SARS) this year, says Tax Consulting South Africa.<\/p>\n
Over the course of 2022, the tax authority increased its focus on revenue collection and compliance, specifically pertaining to HNWIs, said the tax firm.<\/p>\n
Tax Consulting SA said that in\u00a0light of South Africa\u2019s shrinking tax base, the middle to HNWI classes are taking the largest tax hit.<\/p>\n
The implementation of a dedicated HNWI Unit at SARS is evidence that the revenue authority is not investigating wealthy individuals in the short-term but rather wishes to continue the project in the forthcoming years, it said.<\/p>\n
The unit serves to detect non-compliance from the wealthy and ultra-wealthy by assigning managers to assist with their tax compliance.<\/p>\n
“SARS’ purview extends to wealthy South Africans abroad who remain tax residents of South Africa, as well as those in the process of financially emigrating whilst retaining assets and interests in South Africa.”<\/p>\n
In terms of SARS’ 2023 Year of Assessment (1 March 2022 to 28 February 2023), more than 186,691 final demand notices were issued to taxpayers amidst roughly one million tax debt cases which yielded more than R35 billion being collected.<\/p>\n
These figures suggest the taxman is also upping its tax collection powers.<\/p>\n
Ensuring strict compliance forms part of SARS’ strategic objective to make compliance easier for willing taxpayers but hard and costly for taxpayers who remain non-complianant.<\/p>\n
Use of technology<\/strong><\/p>\n SARS has begun embracing the use of technology, specifically artificial intelligence, to ease the burden of detecting non-compliance amongst taxpayers, whilst simultaneously making full use of quick access to tax information from across the globe, said Tax Consulting SA.<\/p>\n “This development has made it near impossible for taxpayers to hold undisclosed offshore interests. If caught, it opens the taxpayer up to a dual audit with the active participation of both SARS and the revenue authority in which the assets\/investments are situated.”<\/p>\n The tax firm said that investigations into a South African’s offshore interests have been common practice with SARS, with asset\/income disclosure notices being issued as far back as 2020.<\/p>\n Increased investigative force results in SARS being able to call on relevant authorities in other countries to disclose tax information on a certain South African taxpayer through an exchange of information request.<\/p>\n “What is noteworthy with the exchange of information requests is that HNWI have historically opted for a jurisdiction such as Ireland, Mauritius, or even the Virgin Islands to hold offshore investments and bank accounts, in light of the favourable tax treatment.”<\/p>\n “This jurisdiction choice included a number of not only investments but also trusts, held by South African tax resident HNWIs, thinking they were sheltered from tax consequences in South Africa.”<\/p>\n Tax Consulting noted a case last year with Airbnb Hosts, whereby SARS imputed a legal obligation on the Irish Revenue Authority to share taxpayer financial information – made possible by provisions in the Multilateral Convention on Mutual Administrative Assistance in Tax Matters.<\/p>\n Such moves by SARS, cement its vision of \u201cbecoming a smart, modern revenue service\u201d.<\/p>\n An increased focus on HNWIs, regardless of what is declared in which jurisdiction, means there is a target placed on these taxpayers, with every move being scrutinised, said Tax Consulting SA.<\/p>\n
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