South African Revenue Service (Sars) has made it easier to clamp down on individuals it deems as “sophisticated taxpayers”, specifically those with the ability “to apply for more than the yearly R1-million single discretionary allowance”. This is per the Sars media statement on May 3, 2023, and is one of the reasons given for the new Approval for International Transfer, or AIT request, that comes with additional disclosures pertaining to specified assets and liabilities, both local and foreign, even at cost.

This extends to South Africans across borders, and whether your elevation to a “sophisticated taxpayer” is derived from blood, sweat and tears, or historic family wealth, in the form of trusts, land and investments, the moment you try to move either cash or assets, in excess of R1-million, you are on Sars’ radar!

All Lines are Enemy Lines

There are a number of South African tax residents, both in South Africa, as well as those who have left the country, but continue to have South African interests, who for many years, believed certain aspects of their wealth, were beyond Sars’ purview. This would typically take the form of offshore interests.

Ensuring your compliance with Sars, whilst within the borders of South Africa can be challenging enough, but trying to do so from abroad, is nothing short of a nightmare, as one unfortunate taxpayer has discovered first hand:

“I have been living abroad since 2017. I ensured I paid my tax in full and everything was up to date. Then, I received notification of a penalty. I tried submitting all details proving that I live abroad and have no outstanding taxes with Sars, but I have not been successful.” 

As Sars has made evident, no airspace is safe, either in South Africa, or offshore. This is enhanced by Sars’ standing automatic exchange of information with over 120 other jurisdictions.

Paying the Price

There has historically been a mindset that once out of South Africa, you no longer need to ensure your compliance with Sars, in the form of settlement of any liability due, or timeous submission of tax returns. This misconception is fast being remedied by the revenue authority, who are proceeding to decline financial emigration applications, on the basis of a simple administrative penalty being owed to them, or an outstanding tax return, even if a nil return:

As can be seen, the cost of non-compliance can be a heavy one; not just on a taxpayer’s bank balance, but in some instances, such as this, can place your entire life on hold.

As evidenced in recent months, and in light of Sars’ strategic intent, our insight in the market has noted Sars upping its collection power to eradicate any semblance of non-compliance. This is geared toward both domestic, and offshore, elements, but more so with historic non-compliance, where taxpayers have hoped Sars believes in “out of sight, out of mind”.

With seasoned veterans manning the walls, Sars is moving to ensure the complete eradication of non-compliance across borders. This may have very far-reaching consequences for wealthy taxpayers. Whether you are in, or out of South Africa, Sars will ensure your compliance, by any means necessary.

No Room for Evasive Manoeuvres

Sars’ strategic intent is clear – “to make non-compliance hard and costly”; and they are making it harder than ever on the non-compliant taxpayer, be it due to negligence, or simple human error.

This is quite simply the next move in Sars’ revenue collection strategy, which they have stepped up, especially in light of the Greylisting announcement in February 2023. Like all strategic movers, Sars has been biding their time, focusing on the most prevalent debts and non-compliance, and working their way through each and every non-compliant taxpayer, calculating interest upon interest and imposing penalties across board.

Sars has been consistently increasing the pressure of its collection measures, with final demands being sent to taxpayers for each and every debt owed to Sars, no matter where you are based worldwide:

A War Winning Formula

With tax filing season opening on Friday, July 7, 2023, time is limited to ensure pro-active compliance and avoid being bogged down in the trenches of non-compliance. Where you find yourself behind enemy lines, there is a first mover advantage in seeking the appropriate tax advisory, ensuring you don’t face the firing squad, for what could be the smallest of mistakes. However, where things do go wrong, Sars must be engaged legally.

As a rule of thumb, any and all correspondence received from Sars should be immediately addressed, by a qualified tax specialist or tax attorney, which will not only serve to safeguard the taxpayer against Sars implementing collection measures, but also being specialists in their own right, the taxpayer will be correctly advised on the most appropriate solution to ensure their tax compliance.

Written by Jashwin Baijoo, Head of Strategic Engagement & Compliance at Tax Consulting SA