23rd January 2018
The South African Revenue Service (SARS) is seeking changes to the tax laws on South Africans working abroad as the country looks to fill a huge tax void. According to recent reports, the country’s economy is suffering due to the number of citizens relocating or working overseas and failing to pay the correct domestic taxes.
SARS clamps down on non-compliance
Throughout last year, SARS and the National Treasury stressed the severity of the issue in a number of Parliamentary hearings, with suggestions made towards the end of 2017 that up to R50billion needs to be accounted for in taxes.
As it currently stands, tax residents are required to declare their world-wide income and capital gains to the Revenue. Non-residents, in comparison, only need to disclose their South African income and will only need to pay capital gains on fixed properties within SA.
However, SARS has claimed that a number of residents are failing to submit their tax returns, submitting blank forms, failing to disclose global income or simply ticking the unemployed option on forms in order to avoid paying taxes on their overseas income.
A reporting nightmare
With such a large void in taxes, the number of non-compliant professionals is likely to be vast, so SARS has certainly got a big job on its hands when it comes to recovering funds. However, this issue has also created concerns for authorities when sharing information as part of the Common Reporting Standards (CRS). Discrepancies are being revealed between the international bank account information of South Africans and their domestic tax return status.
As a result, SARS is seeking to carry out a number of audits on tax residents to identify where misinformation on tax residency is being issued. However, recruiters and contractors from South Africa could find themselves struggling due to the rather intricate nature of the country’s tax systems.
Complex systems creating issues
In order to ensure an individual is registering the correct tax status, SARS is offering a tax diagnostic which will negate the need for a full audit. However, for those who aren’t ordinarily a resident in South Africa, a day long test must be undertaken.
Residents with world-wide income are able to apply for a double tax treaty exemption, however once again the test to claim this is complex and lengthy. Taxpayers working abroad are able to submit a claim of financial emigration, though, meaning they are no longer obliged to disclose global income.
Best leave it to the experts
Clearly, compliance for South African residents working overseas and contractors seeking opportunities in the country is complex. And with SARS seeking to recover lost funds and prevent future non-compliance, the risks for contract professionals and recruitment firms alike will grow. Now really is the time to leave international contractor management to the experts. Contact our specialist team today to find out how we can support your firm.