In addition, SARS amended the tax laws for South African expats, now drawing them into this diminishing tax net.
Previously all income for services rendered abroad were exempt from tax, as long as certain criteria were met by the South African expat. SARS has recently changed the legislation, with a maximum cap of R1.25 million now possibly being exempt from tax. From 1 March 2020, any taxable income above that amount will become fully taxable.
Bearing this in mind, South African expats should consider the below 5 top tips to make them tax ready when tax filing season opens:
- Travel Calendar
When working abroad, it’s easy to jumble up days and dates. The Section 10 (1)(o)(ii) requirements state that you must be outside of South Africa for at least 183 days in any 12-month period, while 60 of those must be consecutive days.
To ensure you don’t fall short of this requirement by a mere day or two, you should prepare a tax travelling calendar to keep record of your movements which should correlate directly with your passport stamps.
- Statement of Gross Earnings
The perception of many expats is that they must only disclose what has been deposited into their bank accounts. This is not accurate. Expats must disclose all their gross earnings when submitting their tax returns. If your employer does not provide you with a detailed statement which summarises your gross earnings, you must request a complete breakdown of your remuneration for the period of 1 March 2020 to 28 February 2021. This statement serves the purpose of a country-specific equivalent of our IRP5 document.
- Disclosure of Benefits
The onus of proof lies with expats to enquire from employers what benefits were paid on their behalf. This is not as obvious as it sounds. Generally, as a rule of thumb, any benefit which has a private component attached thereto, should be disclosed as part of your taxable income.
If you compare relocation flights to a host country versus home leave flights to visit family, you will pay tax on the latter but not necessarily on the former due to certain exemptions available in the Income Tax Act of 1962. Similarly, you should incorporate medical insurance, transportation, accommodation benefits paid by your employer, to name but a few.
Expats should disclose all benefits whilst on assignment to mitigate understating their taxable income with grave penalty and interest consequences.
- Foreign Tax Credits
Global tax laws are not meant to prejudice employees by paying taxes in two jurisdictions. Therefore, South African tax residents have the right to claim back a portion of foreign taxes paid which were deducted from their gross remuneration in the host country.
To prove that foreign taxes were indeed paid in the host country, it’s vital to obtain an official document or tax certificate from your employer (or relevant host tax authority) that clearly depicts what taxes were deducted, and when.
- Additional Tax Deductions
You will still qualify for tax deductions from your taxable income in the form of Retirement Annuity contributions, Medical Aid contributions in SA, or similar schemes or expenses. It is recommended to consult with a specialized tax expert who can advise you on what additional tax deductions you can legally take advantage of to minimise your tax liability in South Africa.
One of the biggest challenges facing expats, is that most taxable benefits are processed by the company finance departments, which neither the expat, nor their direct line management, may have immediate access to. Further complicating the matter is that many benefits are not necessarily seen as taxable in the host country.
SARS aims to deal harshly with transgressions and will not tolerate any form of negligence. You will still be held accountable for any omissions which may be treated as a criminal offence.
Expats must tend to their finance matters with care and should seek guidance from a tax professional. With the right help, they can submit their tax returns knowing that they haven’t overlooked anything pertinent.