The 2022 tax season is around the corner, and it will be one of the shortest to date. The period to submit tax returns will be open from 1 July to 24 October for individual taxpayers who are not provisional taxpayers.
On 3 June, Edward Kieswetter, the Commissioner of the South African Revenue Service (Sars), declared who must file a tax return for the 2022 filing season. Even if you did not receive taxable amounts during the 2022 tax year, you may still be required to file a tax return, according to the notice.
Read: Shorter deadlines for filing 2022 tax returns
Kieswetter indicated in his notice that he requires South African tax residents to disclose their foreign assets and funds they held during the 2022 tax year.
He also requires tax residents to declare all foreign-sourced earnings, irrespective of the amount received, and he mentioned more than once that residents who received any amount for services rendered abroad need to submit tax returns.
This underlines Sars’s continuous focus on South Africans who are working in foreign countries, and it is critical that these South Africans declare their foreign earnings subject to the foreign exemption and foreign tax credits.
Only taxpayers who do not fulfil the South African residence tests do not have to declare their foreign earnings or assets. It is thus critical for South Africans who have left the country permanently to formalise their non-resident status with Sars, to align their factual situation with their Sars tax status.
Sars is taking an extremely stringent approach in considering whether or not a taxpayer is a non-resident.
There is an option to include your “ceasing date” in your tax return but doing so does not result in the necessary manual intervention by Sars to prove and obtain non-resident status in most cases.
However, the “ceasing date” needs to be inserted in the tax return to ensure future returns are pre-populated, but the necessary declaration and further steps still need to be taken to be recognised as a non-resident. The process is commonly referred to as the Tax Emigration process.
The taxpayer in question needs to provide in-depth information regarding their factual situation – for example, even a gym contract needs to be provided to prove their day-to-day living abroad.
Non-residents for tax purposes are taxed only on South African-sourced earnings, not their worldwide earnings.
Sars recently started generating non-resident letters to taxpayers who do not fulfil the requirements of the residence tests. If you are a South African permanently living abroad who is not in possession of this letter, the chances are good that you are still recognised as a tax resident on Sars’s systems.
The Notice of Non-resident letter is currently the most reliable form of proof that you are recognised as a non-resident.
Penalties for late submission
To prevent any administrative penalties for late submission, it is critical to submit the 2022 tax return within the Sars-mandated filing period.
Late in the 2021 filing season, Sars announced that taxpayers who file their tax returns after the filing season’s deadline will face administrative penalties.
Sars appeared to be particularly strict in the application of their notice because penalties were issued on practically all returns submitted after the filing season for the 2021 tax year had closed.
The penalty amount will depend on taxable income or assessed loss of the taxpayer and ranges between R250 and R16 000 a month. The monthly penalty, as determined in accordance with your taxable income or assessed loss, can be applied monthly for up to 35 months.
It is imperative that taxpayers, whether or not they are tax resident of South Africa, take tax filing season seriously.
The general view of South Africans abroad is that “Sars will never catch me” or “I refuse to pay/give anything to Sars/’that government’”. Although this view is understandable where we see maladministration and corruption rife in South Africa, it does not stand as a defence to taxpayers who do not meet their legal obligations to file a tax return and declare relevant income.
A taxpayer’s best defence is to be proactive with Sars and ensure that they remain compliant in terms of the Acts, so as to not give Sars any ammunition to raise penalties or worse.
Reinert van Rensburg is an expatriate tax legal specialist and Jonty Leon is managing partner, attorney and tax practitioner at Leap Group.
Disclaimer: This article is published purely for informational purposes and does not constitute financial or legal advice.
