SARS is once again on the warpath, and it has a lot to do with the current state of the fiscus in South Africa.
We were in a recession before COVID-19, and the lockdown didn’t improve things, which means that they’re on the hunt for revenue wherever they can find it.
This could be bad news for South Africans living overseas, as SARS cracks down on expat tax.
If you’re an expat, and you want to prepare for the coming tax season, the first thing you need to do is determine and familiarise yourself with your tax residency status.
To understand your tax residency status, you first need to work out if you are a South African tax resident or non-South African tax resident. Each category comes with its own requirements…
South African tax residents and non-South African tax residents are taxed differently. South African tax residents are required to pay tax on income earned in South Africa and overseas.
To help you get ahead of the game, here’s a definition of the two:
South African Tax Resident
To determine whether or not you’re a tax resident you’ll have to undergo a physical presence test, which determines the number of days that the taxpayer is physically present in South Africa over a period of five years exceeding:
You cease to be a South African tax resident if you remain out of the country for an uninterrupted period of at least 330 full days.
You also need to comply with the Ordinary Residence Test, which determines your tax status according to where your family and assets are based, the location of your primary residence and other factors.
South African tax residents abroad will be required to pay tax, to SARS, of up to 45% of their foreign employment income, where it exceeds the R1 million mark.
For more on expat tax, head here.
Non-South African Tax Resident
Your status as a non-South African resident will also be determined by the Physical Presence Test and Ordinary Residence Test.
A non-South African tax resident is someone whose permanent residence is in a country outside of South Africa, but who still makes money through a business in South Africa.
For example, if you own a house and rent it out, you’ll need to pay tax on the income that you earn from that rental. Non-South African tax residents will only be taxed on their South African-sourced income.
You’ll need to submit your tax returns in South Africa first, following which you disclose your tax paid on the tax return in your country of residence to avoid double taxation.
At the same time, you need to check if there’s a double tax agreement (DTA) between South Africa and your country of residence. This is an agreement between two countries that prevents double taxation by the country in which your income is earned and your country of residence.
Look, this stuff is complicated, so if you’re struggling to keep up there’s a simple solution: bring in an expert.
We recommend Galbraith | Rushby, who offer professional tax compliance and advisory services to individuals and businesses. They’ll walk you through it, so that you don’t get caught out.
They’re also offering assistance with the complicated procedures involved in applying for the various funds and relief measures available to help South African businesses during lockdown.
Find all of those details here.
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