Tax Diagnostic for South African Expatriates
Check Your Tax Status Per SARS’ Records
We effectively provide a full compliance service for South African employees working outside South Africa. The cost-effective delivery of this service means that we adopt a structured approach only, thus we are assured that first-time accurate guidance is provided and that a compliant position is achieved at a reasonable cost.
The first step in this approach is to conduct a SARS tax diagnostic, where we review your compliance history and tax status. This allows us to get a good view on where you stand with SARS and then propose tax planning and compliance steps. It is important to note that where expatriates believe their status to be compliant, we have noted opposite to be true after an extensive tax diagnostic. This process, when correctly done, mitigates the risk of a potentially damaging SARS audit.
Once the tax diagnostic is complete, we can then deal with specific questions you may have and advise in a comprehensive manner. Furthermore, we can begin planning the necessary steps with considerations that are applicable to your current situation and correct any outstanding returns, zero returns or incorrect tax filings.
If I Disclose My Income Correctly, Does This Mean I Will Need To Pay Tax On Offshore Income
We would like to assess your situation first, but the quick answer is “no”. Whilst you must disclose your employment income, such employment income is exempt where you have met the Section 10(1)(o)(ii) exemption requirements. This means you disclose fully but do not need to pay taxes. NB: Come 1 March 2020, only the first R1 million of your earnings will be exempt under Section 10(1)(o)(ii).
But I have a Tax Clearance?
Tax clearances are simply issued to say you have no returns or money outstanding. It does not verify compliance in any way or prohibit a SARS audit.
I Have Been Audited, Therefore I Am Complaint
A SARS verification exercise is often confused with an audit. Simply submitting supporting documents does not count as an audit. Also, SARS normally only conducts limited audits, i.e. on a specific technical matter. However, where SARS has legally audited you on a specific item, they are legally prohibited from auditing you again, except where there is, for example, fraud or misrepresentation.
My Accountant Has Been Doing My Returns
There are excellent tax practitioners in the market and on many we simply, and always, have to truthfully acknowledge, that we cannot do better work. Unfortunately, there are many exceptions and even where you have paid for a big brand, there are no guarantees.
We often receive cases where the taxpayer is adamant that his/her accountant completed returns correctly and that the foreign employment income was correctly disclosed. When we investigate further with a tax diagnostic, we often find that zero returns were declared. Thus, the taxpayers were paying for a service where their accountant filed tax returns incorrectly. This just emphasizes again, you cannot trust blindly and have to always ask the correct questions to not be misled.
How Will SARS Know?
The most common question we hear from clients who have not disclosed all their income is, “How would they ever find out?”. While we all enjoy our privacy, unfortunately, our privacy is not protected when it comes to our income. The Revenue Authority must be paid its pound of flesh and with the Common Reporting Standards (“CRS”) there is nowhere to hide. Banks and Revenue Authorities around the world are being forced to share information with each other. This means that putting money into offshore structures, thinking that you are safe from the tax man, is no longer the case.
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