Since the controversial amendment to Section 10(1)(o)(ii), known as the ‘Expatriate Exemption,’ took effect on 1 March 2020, a pressing question among South Africans living abroad has been, “How will SARS find me?” This concern is particularly valid for expatriates who currently earn over R1,25 million, given SARS’s intensified focus on ensuring compliance with tax obligations.

For those who have closely followed the changes in South Africa’s tax laws, it is clear that expatriates are being aggressively targeted. SARS has made its intentions evident by establishing a dedicated ‘Foreign Employment’ unit, specifically tasked with monitoring South Africans working abroad, which is further evident by the introduction of the Notice of Non-Resident Tax Status confirmation letter. But one must be wary of what happens when you fall under their scrutiny. Understanding the nature of a SARS audit and what it entails is essential for any expatriate concerned about their tax obligations.

The Great SARS Scavenger Hunt

When SARS initiates an audit, it is a comprehensive examination of your financial and tax-related activities. These questions and requests from SARS are not mere formalities; they underscore the importance of addressing the compliance of tax obligations decisively and thoroughly. Expatriates who have relied on quick and easy solutions may find themselves exposed to significant risks, as such approaches often offer little protection in the long run.

The End of Offshore Hide-and-Seek

The global landscape of tax reporting has shifted dramatically due to the Common Reporting Standards (CRS), an initiative by the Organisation of Economic Co-Operation and Development (OECD). The CRS facilitates the exchange of financial information between revenue authorities worldwide, ensuring that taxpayers cannot hide income earned outside their country of tax residence. For South African expatriates, this means that SARS has been tracking and identifying income earned abroad. Under the current tax law, SARS has the authority to tax any foreign-earned income exceeding R1.25-million. This global transparency makes it increasingly difficult for expatriates to evade their tax obligations.

Avoiding the Taxman's Wrath: Time to Get Serious

Compliance with SARS is no longer something that can be taken lightly. The recent inclusion of the terms ‘wilfully or negligently’ in the Tax Administration Act means that expatriates cannot take a “head in the sand” approach. Pleading ignorance or negligence will not shield anyone from the legal consequences, which may include imprisonment or hefty fines.

For South Africans living abroad, it is imperative to address your tax situation with SARS proactively. The risk of being audited is very real, and the potential consequences of non-compliance are severe. Given the global exchange of financial information through CRS, taking immediate and thorough steps to ensure compliance is not just advisable—it’s essential.

Written by Roxanna Naidoo, Admitted Attorney at Tax Consulting SA