An ITR-12 checkbox permitting a taxpayer to point whether or not they had ceased to be a tax resident of South Africa has been greyed out this tax season. This has confused many eFiling customers wishing to depart the nation completely.
“Which line do I tick to ensure that I am a non-tax resident?” requested one taxpayer. “The second option is blank for me. However, I cannot tick the first option as I am not a foreign national.”
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Source: Author
This sort of query will be the very cause the South African Revenue Service (Sars) selected to disable the checkbox.
The checkbox was by no means meant to stop tax residency. It solely allowed the taxpayer to point they’d already carried out so, so Sars may double-check that the method had been concluded appropriately.
Numerous taxpayers and, disturbingly, tax advisors mistakenly believed that merely ticking the field meant that they’d ceased tax residency, however that is simply not true.
Thus, this can be a welcome transfer by Sars.
A posh course of, not a easy tick
Ceasing tax residency is a fancy course of, one which Tax Consulting SA phrases ‘financial emigration’. It requires a taxpayer to show to Sars objectively their intention to stay outdoors South Africa completely.
If they can’t, Sars will proceed to deal with them as a resident taxpayer and they’ll pay tax yearly on their worldwide revenue, even when they dwell abroad.
The course of requires the applicant to submit an elaborate roadmap to help their declare of non-residence, backed by the required documentation and authoritative proof.
Disabling the checkbox might point out that Sars is conscious of the misperception that this easy possibility is creating and is taking steps to right the issue.
Read: Hidden enamel in new letters of non-residency from Sars
If a taxpayer’s tax advisor advised them that ticking the checkbox is all they should do, they need to instantly hunt down a tax consultancy that specialises in expatriate tax and the monetary emigration course of.
A tax advisor who doesn’t perceive this important distinction is exposing a person’s overseas revenue to vital tax danger.
More adjustments that concentrate on expats?
The greyed-out checkbox may be a crimson flag for expatriate taxpayers.
Expatriate taxation has undergone steady change during the last a number of years as Sars strengthens its concentrate on this sort of taxpayer. This contains advances within the applied sciences it employs, worldwide data sharing agreements it has cultivated with overseas tax authorities, and the laws that helps its mission.
I see the disabled checkbox as an indication that Sars is constant to refine its processes to establish, hint, audit and gather from expatriates, as effectively as prosecute those that are non-compliant.
Read: Tax emigration: Definitions of resident and non-resident are ‘misaligned’
It is due to this fact crucial that taxpayers wishing to stop their tax residency comply with and full the monetary emigration course of appropriately from begin to end.
Without the complicated checkbox, they’re extra prone to just do that and obtain their purpose sooner.
Confirmation or rejection
Expatriates who’re profitable of their software to stop tax residency can apply to Sars for a Non-Resident Tax Status Confirmation Letter, first launched final yr. But this certificates doesn’t come without spending a dime.
While taxpayers will successfully be topic to an audit throughout their preliminary software, requesting the letter will set off a secondary audit to confirm the method was accomplished appropriately. Yet, it’s a doc each expatriate will need to possess.
More just lately, Sars started sending out rejection letters to those that had not adopted the right course of or who had not supplied enough proof of their intention to depart the nation completely.
The excessive variety of rejection letters Sars is presently issuing demonstrates how exacting the method is and the way simple it’s to get it improper.
Thomas Lobban is authorized supervisor for cross-border taxation at Tax Consulting South Africa.