By Reinert van Rensburg and Jonty Leon
The tax season for filing returns for the 2021/2 tax year is around the corner and it will be one of the shortest to date. The period to submit tax returns for individuals who are not provisional taxpayers (in other words, they pay tax via PAYE) is from July 1 to October 24.
1. Must I submit a tax return this filing season?
In general, only if you received income that is taxable do you need to submit a tax return to the South African Revenue Service (SARS). For normal taxpayers, this is if your income during the 2022 tax year exceeded R87 300, if you are under the age of 65. If you are older than 65, it is if your income exceeded R135 150 and if you are older than 75 it is if your income exceeded R151 100.
If you earned less than R500 000 from a single employer, had no other sources of income, and you do not need to claim deductions for business expenses, you are not required to file a return. However, as it is found in practice, it remains the prudent approach to always submit a tax return to declare any earnings received and to ensure your IRP5 certificate is submitted to SARS.
2. Must I disclose foreign assets and income?
On June 3, the Commissioner of SARS, Edward Kieswetter, declared who he requires to file a tax return for the 2022 filing season. 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, saying that tax residents who received any amount for services rendered abroad need to submit tax returns. This underlines SARS’s 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 people who do not fulfil the South African tax residence tests do not need 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 it with their SARS tax status. SARS is taking an extremely stringent approach in considering whether a taxpayer is a non-resident or not.
There is an option to include your "ceasing date" (the date on which you ceased being tax resident in South Africa) in your tax return, but doing so does not result in the necessary intervention by SARS to obtain non-resident status in most cases. The “ceasing date” needs to be inserted in the return to ensure future returns are pre-populated, but the necessary declaration and further steps still need to be taken to successfully be recognised as a non-resident. The process is commonly referred to as the tax emigration process.
You need to provide in-depth information regarding your residence status - for example, you may be required to provide a gym contract or something similar to prove that you are living abroad.
Non-residents for tax purposes are only taxed on South African-sourced earnings and 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.
3. Will SARS penalise me for filing late?
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 since 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 per 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 tax resident of South Africa or not, take tax filing season seriously. A taxpayer’s best defence is to be proactive with SARS and ensure that they remain compliant in terms of the law, 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 a managing partner, attorney and tax practitioner at Leap Group.