South African Tax Man Targeting South African Expats

source

SARS also known as the South African Revenue Service is desperate to plus the dwindling tax revenue as so many high earners have left the country over the last few years. With rising unemployment and those leaving there is a revenue shortfall of around R70 billion and why the desperate moves. If tax was used and spent correctly without corruption then this would not be a problem. Guaranteed if we have a good crypto Bull cycle they will be on the hunt.

When you emigrate from a country you have to do a whole list of things first like receiving a tax clearance certificate that shows you have no outsizing taxes and a police clearance showing you are not wanted for any charges. When you leave the country on a work visa this means you are still tied to the receiver and owe taxes on salaries earned.

The obvious aim for many is to eventually apply for citizenship if it is possible and then break the ties with the country you have left. I know when i left SA back in 1994 I applied and received all my clearance certificates because I am a British citizen having been born in the UK.

The SA Government is now targeting the expats who have work visas and are earning foreign currency in other countries and paying taxes there as well. They will be looking at the entire packages those expats are earning including if their is housing, car packages and return flights included as these are taxable perks.

The downside of all of this is as a South African working abroad you are categorized as a tax resident temporarily overseas. In 2020 the law states that if you earn over R1.25 million per annum which is roughly $60K you are eligible to pay a 45% tax rate. This is earning 4.3K GBP or 5.2K USD monthly so if you earn more you need to become creative. Maybe being paid in shares or crypto in a bonus scheme.

Knowing the rules is rather important as if you stayed outside the country for more than 330 days in the first year then you cease to become a taxable resident. I can recall this used to be 183 days to qualify for tax exemption and I checked this still does apply as long as you have never retuned for a visit in this time period.

The problem still remains however with the R1.25 million number because you are still expected to pay tax over that amount and this is at a 45% rate. The first R1.25 million you would have paid tax on the country in which you are working so this is not a double tax and is the exempt part. The only way one can break away from this is to get a tax clearance certificate freeing you of the reaches.

One has to be aware of the exchange rates because a fluctuation either way could be catastrophic especially if you have to pay in. This is why the tax man is auditing and contacting the expats employees because some expats are on packages that have perks which kind of helps bypass the R1.25 million threshold. One could get a housing and car package plus private medical which is not highlighted on the salary slip and this is what the SA taxman is looking for.

Posted Using INLEO