The tax season for the 2022 tax year is around the corner and it will be one of the shortest to date, writes Reinert van Rensburg, expatriate tax legal specialist; and Jonty Leon, managing partner, attorney and tax practitioner at Leap Group.
The period to submit tax returns will be open from 1 July 2022 to 24 October 2022 for individual taxpayers who are not provisional taxpayers.
Must you 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 Services (SARS). For normal taxpayers, this is when your employment 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 when your employment income exceeded R135 150 and if you are older than 75 it is when your employment income exceeded R151 100.
On 3 June 2022, the commissioner of SARS, Edward Kieswetter declared who he requires to file a tax return for the 2022 filing season. Even if you did not receive taxable amounts during the 2022 tax year, you may still be required to file a tax return, according to the notice.
Comments on the notice issued by SARS commissioner Edward Kieswetter
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 and mentioned more than once that residents who received any amount for services rendered abroad need to submit tax returns. This underlines SARS’s continuous 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 taxpayers who do not fulfil the South African 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 their factual situation 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” in your tax return but doing so does not result in the necessary manual intervention by SARS to prove and obtain non-resident status in the majority of cases. However, the “ceasing date” needs to be inserted in the tax 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.
The taxpayer in question needs to provide in-depth information regarding their factual situation, for example, even a gym contract needs to be provided to prove their day-to-day 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.
SARS will be issuing penalties for late submissions
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 on a monthly basis for up to 35 months.
It is imperative that taxpayers, whether tax resident of South Africa or not, take tax filing season seriously. The general view of South African’s abroad is that “SARS will never catch me”, or “I refuse to pay/give anything to SARS/’that government'”. While that view is understandable where we see maladministration and corruption rife in South Africa, it does not stand as a defence to taxpayers who do not meet their legal obligations to file a tax return and declare relevant income.
A taxpayer’s best defence is to be proactive with SARS and ensure that they remain complaint in terms of the Acts, so as to not give SARS any ammunition to raise penalties or worse.