South African Revenue Service (SARS) is spreading its tentacles far and wide. In recent years, they have become very serious in cracking down on tax defaulters and ensuring there is compliance.
Of particular interest to the SARS has been South Africans living and working abroad.
While in the past they were largely ignored by the taxman, their importance continues to grow as their number grows, and as the country’s economic situation demands more and more tax collection.
This group also involves South Africans in the country, but who have undeclared foreign income.
According to tax advisory firm Tax Consulting SA, “Provided that you are working abroad and have not ceased your tax residency, while not filing tax returns or declaring your foreign income, you are most likely non-compliant.
“Non-compliance with SARS will result in written demands and, in the end, prosecution. SARS will even prosecute based on past non-compliance; it is consequently important to act before it is too late.”
How South Africans living abroad can be tax-compliant with SARS
The easiest and most straight-forward way to be tax compliant in South Africa if you are living abroad, is to cease your tax residency with SARS formally. Depending on your circumstance, this can be done through two ways.
1. Through financial emigration
Unlike the physical emigration, financial emigration is not as straight-forward. If you emigrate without properly notifying the South Africa Reserve Bank (SARB), you are regarded as a South African resident living abroad temporarily. As thus, you are subject to the same tax laws and regulations as people living in South Africa.
The first step in financial emigration is ensuring that you have tax affairs up-to-date and in order. You will need a tax clearance certificate from SARS.
Your application will be successful if you meet the other conditions, e.g. you must have been living and working overseas for a number of years.
Note that financial emigration does not affect your citizenship status. You will need to separately renounce your citizenship for that.
2. Using a double taxation treaty
If you are living and working in a country which South Africa has a double taxation treaty with, you may be tax compliant with the SARS.
The purpose of Double Taxation Agreements (DTAs) and Protocols is to ensure that tax payers in foreign nations do not get billed twice by their current residency and by their home country. Double taxation treaties vary from country to country, and can either exclude the entire income tax, or a percentage of it.
You will need to check on the SARS website on whether a treaty exists between South Africa and the country you are working in.
As an example, South Africans working or making money in the US, are required to pay only 15% income tax in the US. Therefore when SARS is calculating what you owe them, they will have to account for that.
The SARS has the authority to hunt you down anywhere in the world, and ensure tax compliance.
If your location is unknown, your email address, WhatsApp, Instagram, Facebook, or any other form of social media can be used to serve you summons.
Once it is established that you viewed the summons, a verdict can be reached in your absence.