Author: Charmaine Prout

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Tax Deductions (PAYE) – Deductions on your Pension or Annuity

The word “tax” conjures up a variety of emotions in people. Nothing unites South Africans like their collective dislike of taxation. Few things are as stressful as receiving a letter from SARS at the end of the year telling you that you owe them money, especially when it has not been budgeted for.

For pensioners with one income source during a tax year, the taxation process is relatively simple because the deduction system ensures the correct PAYE (Pay As You Earn) deduction from their pension or annuity income. However, when a pensioner has more than one source of income, the different income sources are only combined at the end of the tax year to determine the correct amount of tax due. This often places them in a higher tax bracket than what they were treated as on their pension or annuity income, hence resulting in a tax shortfall at the end of their assessment. In other words, each income source is treated in isolation of the other. Pensioners can request that their living or life annuity administrator deduct a higher amount of PAYE to adequately cover any tax owing at year-end. However, not many pensioners use this option, which leaves them with an unexpected tax expense at year-end.

To assist pensioners with more than one source of income, SARS recently introduced legislation (effective 1 March 2022) that makes provision for them to determine a more accurate PAYE deduction amount. They do this by using the latest data available to them. Your living or life annuity administrator will then deduct a more accurate amount of PAYE from your pension or annuity incomes.

So, in practice, what does this mean for you and is there anything you need to do?

  1. No, you do not have to do anything because SARS will provide your living or life annuity administrator with the PAYE deduction percentage.
  2. For pensions or annuities payable during March 2022 and for the periods thereafter, your living or life annuity administrator will use this rate to deduct PAYE from your pension or annuity.
  3. The rate provided by SARS will be valid for the whole tax year, unless circumstances that influence your year-end tax liability change. In such a case, your living or life annuity administrator may revert to applying the normal PAYE deduction rate, with effect from the month in which they become aware of the change in circumstances.
  4. The PAYE deducted from your pension may be slightly higher, but in return, you are unlikely to be faced with an unexpected tax bill at the end of the tax year.
  5. You may, at any time, request your living or life annuity administrator to deduct PAYE at a rate higher than the rate provided by SARS.
  6. You may also request your living or life annuity administrator to use the normal PAYE deduction rate and not the one provided by SARS. Take note that this may put you back into a position where you can expect a high tax bill at year-end.

Hopefully, this new legislation will provide pensioners with peace of mind that they won’t be receiving any surprises from SARS. If you have any questions, we encourage you to speak to your tax advisor.

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Taxes and death – the two inevitables

Death is an uncomfortable topic that no one wants to talk about. As a result, important information may not be relayed, inevitably resulting in delays in the winding up of estates as well as unnecessary stress, penalties and interest.

The importance of this was highlighted earlier this year when a client was referred to us by Chartered Legacy & Trust. She had been appointed as the executor of her parents’ estate. In 2012 her Mom passed away. Her parents were married in community of property. For tax purposes, this in itself is a difficult return to complete as income is split between each spouse. Her father passed away in 2016. When she started collecting information needed for compiling the Liquidation and Distribution Account, she discovered that her father had not submitted tax returns to SARS since February 2001.

For an estate to be finalised, all taxes need to be up to date, and what followed was countless hours spent digging
through boxes, standing in queues at banks, and endless administration to try and submit his tax returns up until his
date of death.

We finally managed to get up to date with her father’s tax; however, she highlighted some important lessons from her
experience as executor of her parents’ estate.

  • Unless you have the required experience and knowledge, don’t accept the role of executor without understanding what it fully entails and knowing who the administrators will be.
  • Don’t accept the role of executor without having some idea of the full picture of the person’s assets and liabilities and how you can get that picture and access documents, statements and details of investments on the person’s death.
  • Please have a good understanding of the family situation (e.g. your role vis-à-vis some children) and realise what it means, as the estate may be wound up, but these responsibilities will probably stay with you.

Tax Planning is an integral part of the RetiremeantTM Planning process. Chartered Tax’s experienced in-house team of Tax Specialists and Accountants nurture ongoing relationships with our clients and meet with them several times a year. In her experience, she found it was critical to partner with companies that work together between tax and estate administration, as any unreconciled item between the two will cause lengthy delays. She also reiterates the importance of partnering with practically-orientated companies to develop a relationship of mutual trust.

We encourage clients to start having these uncomfortable conversations around death and how to gain access to files,
tax and financial information. Staying up to date with tax returns is vital to avoid ending up in a similar situation.

If you need any assistance in getting your tax affairs in order, please get in touch with your RetiremeantTM Specialist or Tax Advisor.

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Tax Filing Season for individuals opens on the 1st July, what do I need to prepare?

For many of our clients, tax filing season is associated with feelings of apprehension and confusion. Most of us only do this once a year, and it can be quite bewildering and daunting to figure out exactly what we need to have on hand to submit our tax returns correctly.

With SARS announcing that tax filing season for individuals will run from 1st July until 23rd November this year, it is time to start preparing the information and documents needed to submit our tax returns.

Remember that taxable income can come from many sources, and it is important to declare all income on your tax return. We have listed some items below that you need to consider when preparing your documents.

  • If you earn income from an employer, pension fund or living annuity, you will need a copy of your IRP5 certificate, which will break down the income you have received and PAYE deducted from your income and paid over to SARS on your behalf. If you have not received this already, you can request it from your employer or your retirement fund administrator.
  • Are you claiming a travel allowance? If so you will need a logbook detailing your business mileage for the year as well as your opening and closing mileage readings for the period 1st March 2020 to 28th February 2021. SARS has a template for this available on their website (2020-21-SARS-eLogbook.pdf), alternatively you can create one fairly easily using excel.
  • Are you earning rental income? If you are then you will need to prepare a schedule detailing all the income and expenses relating to the rental property. Be sure to have your proof of expenses easily accessible should SARS request them.
  • Do you have any bank accounts, both local and offshore that earn interest? If so, you will need an IT3(b) for each account detailing the amount of interest you earned during the year. The good news is that most banks allow you to download this using online banking.
  • If you have an investment such as a Unit Trust or Share Portfolio, you will likely have earned some taxable income from this. This income could be in the form of interest and dividends or in the form of a Capital Gain if you made any withdrawals from the investment. You will need a copy of both the IT3(b) and IT3(c ) certificates which detail this income.
  • Have you made use of a Tax-Free Savings Account? If so you will need a copy of the IT3(s) certificate from the provider detailing your contributions, withdrawals and profit or loss made on the investment.
  • Are you the main member of a medical aid? If so, you will need your medical aid tax certificate showing your contributions for the year, the number of members on the medical aid, and any expenses that were not paid by the medical aid. This can normally be requested off your medical aid’s online portal or using the self-help menu options if you prefer to request it telephonically. In addition to your medical aid tax certificate, if you had any qualifying medical expenses that you paid and did not submit to the medical aid, you will need a schedule of these, as well as the invoices and proof of payments should SARS requests them.
  • If you have made contributions towards a Retirement Annuity, you will need a copy of the contribution certificate from the provider.
  • Have you made any donations to registered Public Benefit Organizations (PBOs)? Should you have you will need to request a copy of the Section 18A receipt from the organisation to claim your tax deduction.
  • Take special care to mention to your tax consultant if you have sold any properties in the year under review.
  • Importantly, make sure that all your personal registered details are correct on e-filing and at SARS, especially your ID number.
  • If you are considering a work from home expense claim, there are specific requirements around this. Please refer to our previous article for more details.

Please remember that although most of this information should automatically pull through to your e-filing profile, you will need to have the hard copies available to submit to SARS if you are selected for a SARS verification.

As everyone’s tax return is unique and tax legislation is complex, this article is for information purposes only and is not to be construed as tax advice, nor does it take into account your specific financial circumstances. We encourage you to speak to a tax specialist from Chartered Tax for more guidance as we believe professional specialists can add great value in helping you to keep your tax affairs up to date and in order.

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Key changes in the tax law

President Cyril Ramaphosa has given effect to the 2020 tax proposal by signing three tax acts into law. These acts were promulgated on 20 January 2021. There were 10 key changes. We have highlighted the five key changes which we feel are most relevant to our clients.

1. Withdrawal of retirement funds upon emigration

Under the current legislation, a person who emigrates from South Africa and has formalised their emigration using the ‘financial emigration’ process, can fully withdraw their retirement funds. This would include for example the withdrawal of a retirement annuity, prior to maturity of that fund. This has been useful for many South Africans who have left or are currently leaving, as often these funds are used to set themselves up in their new home country.

It also allowed for taxpayers to decide to remove their investment and invest in something more viable for their new circumstances.

South Africans who have already financially emigrated still have the opportunity to withdraw their retirement funds under the current regime.

Those that have finalised financial emigration, or have their full application submitted to SARB prior to 28 February 2021, will now have the opportunity to withdraw their retirement funds under the old dispensation until 28 February 2022. Government has therefore provided a one-year extension on what was previously announced, to withdraw those funds with financial emigration.

However, without financial emigration, and from 1 March 2021, taxpayers will only be able to access their retirement benefits if they can prove they have been non-resident for tax purposes for an uninterrupted period of three years.

2. Anti-avoidance rules bolstered for trusts

The anti-avoidance rules aimed at curbing tax-free transfers of wealth to trusts have been strengthened to prevent persisting loopholes.

The amendment is directed at structures where individuals subscribe for preference shares with no, or a low rate of return in a company owned by a trust connected to the individual.

Ongoing changes to these rules again bring into question the thinking that trust structures are tax efficient.

3. Estimated assessments

The terms under which SARS may issue an assessment based on an estimate has been expanded. SARS may now issue an estimated assessment where the taxpayer fails to respond to a request from SARS for relevant material.

The amendment also bars the taxpayer from lodging an objection against the estimated assessment until the taxpayer responds to the request for material.

4. SARS can withhold your refund if you are under criminal investigation

In terms of the Tax Administration Act, SARS is entitled to withhold refunds owed to taxpayers in certain circumstances.
The TALAA expands these provisions to determine that if you are subject to a criminal investigation in terms of the Tax Administration Act, SARS is entitled to withhold any refund it owes you, pending the outcome of the investigation.

5. Criminal sanctions for minor tax offences

In future, taxpayers may be criminally prosecuted for minor tax offences, even if it was due to negligence. This new rule is also part of the South African Revenue Service’s (SARS’s) campaign to curb non-compliance.

In the past, a taxpayer could only be criminally prosecuted for a tax offence if they wilfully committed the offence, but this provision has now been scrapped from the legislation.

Due to the fact that intent is no longer required, if you are non- compliant as a result of ignorance of your obligations you may be found guilty of a criminal offence face receiving a fine or up to two years of imprisonment.

Taxpayers are encouraged to speak to their advisers to understand these changes and special heed must be paid to the changes that are now law. The most important change that applies to all taxpayers is the one that criminalises negligent non-compliance. These changes serve as a cue for everyone to take ownership of their tax affairs.

At Chartered Tax our main objective is to keep our clients compliant and up to date on the current tax laws, so please contact us if you need any clarity regarding the new tax laws.

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Coronavirus crisis – there could be a tax break waiting for you!

When lockdown was announced in March, we, like many of our clients, were forced to work from home. While restrictions have eased, many South Africans will continue to work from home for the foreseeable future.

Under South African tax rules, the cost of working from home is an expense you can offset against the money you earn if you are an independent contractor, a commission earner or a full-time employee.

Those who qualify can claim all their expenses from working from home, including: airtime, data costs, electricity and water, wear and tear on office equipment, stationery and even a portion of their rent or mortgage payments. The calculation of square metre of home office area, relative to the total residence, with the same ratio applied to expenses such as rates and interest, will need to be submitted when claiming expenses.

The most crucial criteria to qualify claiming expenses is that you had to have spent at least 50% of the Tax Year working from home. This means that you would have worked at home until at least the end of September, six months since lockdown began. In that case, employees who cover their costs can claim these back, come tax time.

There is a critical aspect of claiming these costs against tax; you need to have a dedicated workspace and must be able to prove that it exists. This is not simply a table in the corner of a room; you need to prove that your workspace at home meets specific criteria for it to be classified as a home office. For example, you need to prove that the space is a dedicated work area that is used regularly, only for work purposes, and that work-related tasks are primarily carried out from this space. You will also need to have equipped the space specifically for work-related duties.

People who have been working from home temporarily, and just “made do” in the short term using the dining room table as their workspace should abandon claims for tax deductions. A last word of caution, should you claim a home office expense this could impact your primary residence capital gains tax exemption.

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From my many years of experience with SARS, I am advising that you keep track of all expenses and days worked at home, and that you have supporting documents if, and when, SARS asks for these.

Many of my clients have been sending me pictures of their home offices to keep on file and to load up to SARS when completing the February 2021 returns; the image left is such an example of a very proactive taxpayer.

Please note that this does not take into account your specific financial circumstances, any potential capital gains tax or any calculations required prior to applying for any deductions, and is for information purposes only. Should you be interested in making use of any deductions mentioned in this article, please contact your RetiremeantTM Specialist or Tax Advisor.

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Sleuthing SARS on a mission

Despite numerous warnings in the media and from economists, South African tax-payers did not receive the promised “nasty surprise” in FinMin Tito Mboweni’s annual Budget Speech on 26 February. There was no increase in VAT or Capital Gains Tax, no sin tax hikes and no introduction of a once-off personal tax levy. Do I hear a collective sigh of relief?

Instead, the public service wage bill is in focus to achieve the R160 billion in cuts over the medium term.

Among those targeted for a reduction in benefits and salary are the millionaire 290,000 public servants earning R1million plus per annum. This seems to be more in line with the President’s 2018 State of the Nation address, where he promised a lifestyle audit, a tool widely accepted to combat tax evasion.

Both KPMG and Eskom reportedly conducted lifestyle audits on their staff last year, with the latter reporting that violations among their 365 senior employees amounted to R1.3 billion for the 2019 financial year.

SARS gets tough on defaulters

Despite a reprieve from a tax increase, South African tax-payers should not be lulled into a sense of complacency. SARS is, by all accounts, working hard to recoup its former reputation as a globally respected institution. One of its most obvious priorities is to increase revenue generation. For the financial year ended 31 March 2019, SARS had collected R14.6 billion less than estimated in the revised Budget.

SARS’ success in pursuing outstanding defaulters has featured in recent headlines.

In one report in early March, a Cape Town businessman’s assets were seized by SARS to settle a R354 million tax debt. The article cites SARS Commissioner Edward Kieswetter, who said, “this latest protracted legal battle is further evidence that SARS is working hard to regain capacity lost over the past few years in dealing with taxpayers avoiding their tax obligations through an abuse of the legal system” (Sowetanlive.co.za).

An earlier report, dated February this year, saw yet another Cape Town businessman evicted from his home, which is held by a company. The Constitutional Court dismissed his appeal to place the company in business rescue, as it is already in liquidation.

“SARS will make it costly for those determined to be non-compliant and will oppose vexatious and frivolous litigation up to the highest court in the land,” Kieswetter promises (TimesLive.co.za).

“Tax crime, like corruption, is not a victimless crime. It directly affects the poorest of the poor, who are dependent on basic services, including a social security safety net for pensioners, child grants and provision of housing and education.”

And inadvertent errors?

Unintentional errors are treated the same as intentional non-compliance, but SARS considers overall tax behaviour when penalties are determined. It is therefore of utmost importance for tax-payers to use the services of qualified and SARS-registered tax practitioners to submit their tax returns.

Reason for hope

South Africa undoubtedly faces a herculean challenge in getting its economy on track, with global ratings agencies’ threats hanging over us. Calls for President Ramaphosa to move more quickly against corrupt elements that persist in the ANC grow louder and more urgent. Nevertheless, as SARS’ vigilance reveals, processes are underway to restore financial stability.

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Is the Taxman eyeing your donations?

In this article, Charmaine Prout, Director of Chartered Tax, helps us understand the tax implications of donations that we may make – to family, friends or charitable institutions – and guides us on how to make benevolent contributions without having to donate to the Taxman at the same time.

You may have heard of or read those encouragements to give away your treasured items to loved ones or favoured friends before you pass away. That way you get to see them enjoy what once gave you joy, and they get to express their gratitude. A win all round, you might say … but is the taxman also winning?

Let’s start with what SARS understands by the term ‘donation’. The definition is a ’gratuitous disposal of property, including any gratuitous waiver or renunciation of a right”. This means that simply giving an asset away is not the only way to donate; you are also donating if you sell an asset for less than its actual market value. The difference between the price paid and the price that should have been paid is considered a donation.

The Income Tax Act indicates that donations tax – 20% of the value of the donation – must be paid by the donor within three months of making the donation.

Exemptions

If you want to see your family or friends enjoying your magnanimity, while reducing your Estate Duty at the same time, take advantage of the annual exemption per natural person of R100,000 per year – you can donate to anyone, be it a child, a grandchild, or a trust (you can make this a recurring annual investment). The R100,000 can take the form of money or assets, like property.

A loan account in a trust can also be reduced by using the R100,000 annual donation.
This is one way to benefit from using the exclusions perfectly legally and thereby shift the value of your estate into the hands of your ultimate beneficiaries now rather than only on your death.

If you donate to your spouse, that donation is completely exempt from tax, as are donations to any sphere of Government or any registered political party.

All these exemptions apply to companies as they do to individuals.

You can donate up to 10% of your taxable income annually to a recognised Public Benefit Organisation.

SECTION 18A Tax Deductible Donations

Section 18A of the Income Tax Act provides individuals, trusts and companies with a tangible incentive to make donations to non-profit organisations, within certain limits. It is the onus of the NPO to prove that its work provides a public benefit.

For example, an individual with an annual taxable income of R280,000 can donate a maximum of R28,000 to a S18A organisation and claim this donation as a deduction on his personal income tax return. This translates into an effective out-of-pocket expense of R15,400 or 55 % of the amount donated.

A company with an annual taxable income of R1,000,000 can donate a maximum of R100,000 to a S18A organisation and claim this donation as a deduction on the company’s corporate tax return. This translates to an effective out-of-pocket expense of R72,000 or 72% of the amount donated.

In conclusion

As I often say to my clients, the focus of SARS is to level the playing field. So, whether you pay 20% in donations tax or 20% in Estate Duty, it’s all the same revenue to SARS. You, however, can make decisions that result in the best outcome for your Financial Plan. For the sake of the country’s growth and the goodwill of the taxpayer, so do we.

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Two ways to determine tax residency

On 1 March 2020, new rules about expat income and taxation thereof come into effect. Two tests are applied to determine your tax residency.

The ordinary residence test

The ordinary residence test serves as the point of departure; in other words, it is the first step in determining tax residency.

According to the South African Revenue Service (SARS), the following requirements need to be satisfied for a person to qualify as ordinarily resident:

  • An intention to be ordinarily resident in South Africa, and
  • Steps indicative of this intention being taken.

SARS may challenge a person’s intention to be ordinarily resident, or not, by looking at objective facts that might disprove such a subjective intention.

It is important to note that a person can be ordinarily resident in South Africa regardless of the number of days spent in, or absent from, South Africa.

Here are helpful questions to ask in determining whether you are ordinarily resident in South Africa:

  • Is South Africa the country to which I return to from my wanderings?
  • Is my primary residence within South Africa?
  • Where is my most settled place of residence?
  • How many days do I spend in South Africa compared to other jurisdictions?
  • What nationality am I?
  • Do my family members reside in South Africa?
  • Where is my immovable property located?
  • Where are my assets or personal belongings located?
  • Is there any documentary evidence on file (such as emails and other correspondence) implying an intention to live permanently in South Africa?
  • Where are my business and economic interests primarily located?
  • Do I have any political, social and religious ties to South Africa?

If a person has no intention to be resident in South Africa and this intention is objectively evidenced by steps taken to give effect to that intention, that person will not be ordinarily resident in South Africa.

The days test

The next step in determining if a person is resident in South Africa is to apply the days test.

If you are not ordinarily resident in South Africa, you may still qualify as a ‘resident’ based on the number of days spent in the country over a period of six years. Intention is irrelevant under this test.

In terms of the days test, you are resident in the following circumstances:

  • If you are physically present in South Africa for more than 91 days in aggregate during the current year of assessment; and
  • If you have been physically present in South Africa for more than 91 days per year during each of the previous five years of assessment; and
  • If you have been physically present in South Africa for a period(s) exceeding 915 days in aggregate during the previous five years of assessment.

In calculating the number of days, a day includes a part of a day, but excludes any day spent in transit through and without formally entering South Africa.

In the first year of assessment in which you fulfil the days test requirements, you are deemed to be a resident from the first day of that year of assessment.

If you are deemed a South African resident because of the days test, residency can be broken by leaving South Africa and remaining outside of the country for a continuous period of at least 330 full days.

You are welcome to contact the Chartered Tax team if you have any queries regarding this new legislation.

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To financially emigrate or not?

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There is much conflicting information in the media about the taxation of South Africans on their foreign earnings and the impact of tax law amendments.

Currently, remuneration earned by South African tax residents for services rendered abroad is exempt from South African tax, if that resident has spent more than 183 full days (including a continuous period of more than 60 full days) outside South Africa in a 12-month period during which those services were rendered (‘foreign earnings exemption’).

With effect from 1 March, 2020, the foreign earnings exemption will only apply to up to R1 million of foreign income earned in a tax year. Income earned abroad exceeding R1 million will not be exempt under the foreign earnings exemption.

Many South Africans work and/or live abroad may want to ‘financially’ emigrate by placing their emigration on record with the South African Reserve Bank. They think that by taking this measure, their foreign income will not be taxed in South Africa. This move will not necessarily exempt them from paying tax in South Africa.

Who will be affected by the changes in the law?

It is important to understand the difference between becoming non-resident for tax purposes and non-resident for exchange control purposes.

The foreign earnings exemption, and its new cap, only applies to South African tax residents. If you are not a South African resident for tax purposes, you will not be affected by this amendment. People who have placed their emigration on record with the Reserve Bank may still be tax resident in South Africa.

South African tax residency

South Africa has a residence-based tax system. Residents are taxed on their world-wide income, except if specifically exempt, as is the case with the foreign earnings exemption.

A resident is defined by the Income Tax Act 58 of 1962 (ITA) as a person either:

  • ordinarily resident in South Africa (the ‘ordinary residence test’), or
  • a resident by their physical presence in South Africa (the ‘days test’).

To be defined as non-tax resident in South Africa, you must pass both tests.

Even if a South African tax resident in terms of the tests, you may still be regarded as a non-resident for tax purposes under the applicable double tax agreement (DTA) between South Africa and the country where you are working or living.

For helpful tips in determining your status in terms of the two tests, click here.

Double Tax Agreements

If you are defined as a South African tax resident by either the ordinarily resident or days test, the applicable DTA entered into between South Africa and the country in which you are living and/or working might regard you as non-resident in South Africa, and as resident in the other country. Make sure you check the terms of the DTA.

Section 6quat rebate

If you are a South African tax resident taxed in another country on the same income taxed in South Africa, section 6quat of the ITA provides for a rebate of the foreign tax paid against South African taxes. The rebate is limited to the South African tax payable on the foreign income.

So, for South African tax residents, all taxes paid abroad on income in excess of R1 million will be rebated against the South African taxes payable on that same income. Earnings exceeding R1 million will therefore not be taxed twice, but at the higher rate of South Africa or the foreign country.

Financial emigration through the Reserve Bank

The main reason for financial emigration is to break exchange control residence.

To financially emigrate, apply to the Financial Surveillance Department of the South African Reserve Bank with proof of the right, either by foreign passport or an appropriate visa, to live in another country.

Through the application, show your intent no longer to be permanently resident in South Africa.

By financially emigrating, you are strongly demonstrating the intent to have a primary residence outside South Africa and not to be ordinarily resident here.

Conclusion

Financial emigration is only a strong indication that you are not ordinarily resident in South Africa, and not a definitive factor. SARS takes various factors into account, and a person’s residency status at the Reserve Bank is only one of them.

Even if you can show that you are no longer ordinarily resident, you may still be tax resident because of number of days spent in South Africa, or of the applicable DTA between SA and the country where you are working.

Non-residents for tax purposes in South Africa do not pay tax on foreign sourced income.

The amendments to the foreign earnings exemption would therefore not be applicable to non-residents as the foreign earnings are never taxable.

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SARS Commissioner comes with commendable credentials

edward-kieswetter-1While chatting with clients and friends following this year’s Budget Speech, the phrase, “at least” was frequent feature: “At least it was Tito Mboweni” or “At least Ramaphosa is President” or “At least, it isn’t so-and-so” (I leave specific names to your imagination!).

Regarding our new SARS Commissioner, though, we tax practitioners and experts are far more positive.

Why so hopeful, you wonder … and rightly so! Following a string of Commissioners, including the questionable Oupa Magashula, and, most recently, the deeply tainted Tom Moyane, we need the restoration of this once globally respected institution, systematically dismantled by corrupt officials.

Take centre stage Edward Kieswetter, new SARS Commissioner.

From the time of his appointment, Kieswetter has been at pains to comply with good governance: he resigned as Shoprite’s Lead Independent Director, and fully disclosed outside interests and involvement in organisations, including directorships on SOEs such as Transnet and Technology Innovation Agency.

President Ramaphosa has said that he has “every confidence” that this new Commissioner has the “experience, integrity and skills” to restore this once fêted institution to its former honour. Between 1997 and 2009, under Pravin Gordhan’s leadership, SARS established itself as one of the foremost revenue services in the world, embracing technology and viewing the taxpayer as valuable customer. It was applauded as efficient, transparent and modern.

Fit for task

In May, Fin24 listed the most urgent matters facing Kieswetter, and these serve to highlight the new Commissioner’s suitability for his new role.

Firstly, SARS needs to increase its revenue collection. For the financial year ended 31 March 2019, SARS had collected R14.6bn less than estimated in the revised Budget – this larger deficit was attributed to an increase in refunds paid out. In contrast to Moyane with no tax experience or financial background, Kieswetter was SARS Deputy Commissioner between 2004 and 2009, during Gordhan’s tenure as Commissioner; it is said that Kieswetter’s unit was responsible for 30% of the SARS revenue generated then. This contributed to the Government surplus that allowed South Africa to weather the 2008 financial crisis better than many countries. Kieswetter has a Master’s degree in Education, an Executive MBA and an MCom degree in Tax.

SARS must cut down on illicit trade in its mandate to increase revenue collection, and has now tendered for a track and trace marker. South Africa has reportedly lost over R6bn in a single year in illicit alcohol trade and loses around R8bn annually to illicit tobacco trade.
In addition, SARS will be following up on errant taxpayers. Kieswetter has already articulated his policy of prosecuting ‘without fear or favour’.
Secondly, cleaning up after state capture will not only require an unwavering commitment to personal integrity, but also mean reviewing procurement processes, re-establishing the Large Business Centre and other units dismantled by Moyane, and evaluating all SARS posts. Moyane suspended or replaced the whole of the SARS top structure in four months, and in less than a year, many of the most experienced and respected executives had left. IT development halted and millions were paid to such companies as Bain & Co.

So, developing future leaders will be part of Kieswetter’s mission, to recreate a thriving and confident organisation. Kieswetter is known for his transformative leadership approach, with a philosophy of a leader as steward, as an opportunity to serve, not to be served.

Next, with Moyane having stopped the drive to modernise systems, Kieswetter must increase innovation. Embattled IT head, Mmamathe Makhekhe-Mokhuane, has been on suspended leave, following her infamous television interview in October last year.

All these tasks are aimed at restoring the institution’s credibility, both locally and abroad. Finance Minister, Tito Mboweni, is looking forward to “seeing SARS re-established as a respected tax collector and improved revenue collection outcomes.” For the sake of the country’s growth and the goodwill of the taxpayer, so do we.

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