The commencement of the 2023 tax filing season saw the South African Revenue Service (Sars) further upholding its commitment to keep a close eye on high-net-worth (HNW) taxpayers with assets above R50-million. 

Where you are worth more than R50m, Sars asks in the 2023 tax return season, which has just commenced, for extremely detailed information. The compulsory declaration of all South African and International assets and liabilities in the 2023 tax return is just the start and the process goes far beyond what is just in your name. Sars knows that wealthy taxpayers very often use structures, so this is obviously caught by their 2023 tax return questions. 

This heralds a new dawn for the affluent taxpayer or someone looking to create sustainable wealth in South Africa. A multi-faceted tax compliance strategy will be important to protect against not giving Cesar more than what is due, as the wealthy is clearly part of the plan to fill the tax collection coffers.

A Long Time Coming 

While this may come as a surprise to some, this additional step in filing your tax return as an HNW taxpayer has been in the works for some time. During the 2022 Budget Review, the National Treasury and Sars announced that this special disclosure requirement will be imposed for taxpayers with assets above R50-million from the opening of the 2023 filing season. 

Multi-level Scrutinization 

According to National Treasury and Sars, this would assist with the detection of non-compliance or fraud through the existence of unexplained wealth. Pertinently, this additional information would “also help in determining the levels and structure of wealth holdings as recommended by the Davis Tax Committee.”

Sars has confirmed these requirements on its “Tax Season” webpage, which confirms that taxpayers with business interests are required to declare their assets and liabilities (at cost) in their tax returns each year. Taxpayers who fall within this category, and with assets above R50-million, are further required to declare specified assets at market values on their 2023 tax returns. 

Source: https://www.Sars.gov.za/types-of-tax/personal-income-tax/filingseason/

Critical Juncture for High-Net-Worth Taxpayers

With Sars now focusing heavily on HNW taxpayer declarations, they have now added a formal tick box on the individual Income Tax Return form (ITR12) for the 2023 tax year. The process starts with a rather inconspicuous question reading: “Mark with an “X” if you have assets in excess of R50-million” –

This amendment only solidifies the notion shared by many tax practitioners that Sars seems to be casting a wide “catch-all” net to eradicate non-compliance at all levels – but especially the wealthiest level. 

These changes place HNW taxpayers at a critical juncture, as Sars wants to unearth everything to do with their assets and liabilities, immediately. Further, this information will be checked against a risk matrix which is not too dissimilar from what leading professional tax practices already perform for their affluent and sensitive clientele, as part of their own “diagnostic” processes.

Being Safe Against Sars  

All HNW taxpayers should simply accept that they will be investigated by Sars at some stage and the disclosures made in 2023 must have a great degree of care, with that future reality in mind. The complexity to be well-planned normally requires a multi-dimensional team with some very specific expertise. Experience in dealing with complex tax filings and the ability to foresee the questions that Sars will ask is probably going to be the key ingredient.

Written by Lambert Roberts, Expatriate Tax Team Manager at Tax Consulting SA