By Rebecca Ellis
Here is how SARS is going to come after you – And what you can do about it?
WED, MARCH 14 2018-theG&BJournal-WORRIED? If you are a South African Expat worker these proposed new laws can have a profound effect on your income.
IS IT REALLY GOING TO HAPPEN?
Nobody can give you guarantees that they will or will not come into law. However – the government is moving quickly on the proposed law change and has already issued two draft bills. The 2017 Taxation Laws Amendment Bill and the 2017 Draft Tax Administration Laws Amendment Bill.
WHEN WILL IT COME EFFECT?
1st March 2019 is the planned introduction date.
WHY SO FAR AHEAD?
It goes without saying that proposed legislation is not going down well with the hundreds of thousands of South African expat workers. New Tax legislation is normally introduced quicker than this proposed period which indicates the government is giving people plenty of time to get their affairs in order.
WHAT WILL IT MEAN IN LAYMANS TERMS?
This does not make pretty reading for the large South African community but let’s give you two scenarios of South African expats:
-If you are employed in a lower tax rate country, let’s use 20% as an example. SARS will be coming after you for up to an additional 25%. In other words, your tax bill could more than double.
-If you are a South African expat worker (traditionally the month on a month out the type of contractor), if your abode by the current rules you pay no tax in South Africa. This will change drastically as you will be now taxed the same as any South African worker.
IS THIS A GAME CHANGER?
Barry Pretorius, who has lived abroad for 18 years, but is currently working in Abu Dhabi, recently started a petition against the change to foreign employment income-earned tax laws.
The petition has already received support from more than 3000 expatriates.
He said that while he didn’t mind paying tax, the South African government would have to be fair.
“It has to be doable. The proposed system isn’t. Because of the exchange rate, you are very quickly placed into a high tax bracket, and that would make it impossible to pay.
“If South Africa’s tax scales are applied unilaterally, we could not pay it. If I had to pay 20 to 40% tax I would default.”
“The majority of people in the Middle East are in the same position. Our country will turn us into tax aliens and tax criminals.”
In short many South Africans will simply not be able to afford to work offshore and will have to return home.
WHAT CAN I DO ABOUT IT?
Many expats will wait for the legislation to take effect and then desperately search for a solution. We believe that planning in advance (prevention) is better than seeking a potential cure.
The one silver lining is that SARS has given you this period of time to get a plan in place and protect your earnings from the additional tax burden.
Take advantage of this and don’t put yourself in the position post-March 2019 of saying I wish I had………..
TAX SMART SOLUTIONS, HOW CAN THEY HELP?
At Pomona Wealth, we pride knowing the best advisors in the market who can help out the ever-changing world of global taxation, We are working with Tax Smart South Africa to ensure our clients get the advice they need.
Tax Smart Solutions was specifically set up to look for legal opportunities within the current South African and international tax regimes. The opportunities they identify are based on expertise gained over the last 20 years plus and their aim is simply to ensure you take advantage of any tax breaks you may not be aware of.
As said by the famous Morgan Stanley –
“You must pay taxes. But there’s no law that says you gotta leave a tip.”
If you are interested in mitigating the amount of tax you would pay under this proposed new tax legislation please use the contact box below and we will get in touch with you.
Rebecca Ellis A Personal investment advisor, based in Zurich| REBECCA.ELLIS@POMOMAWEALTH.COM|PASCAL.CREPIN@POMONAWEALTH.COM
