In terms of the collection process, South African Revenue Services (SARS or the equivalent of IRS and HMRC, the competent taxing authority in SA) expects all provisional taxpayers to be either 80% or 90% correct in the end February provisional tax estimate, compared to the final assessment or IT34.
Irrelevant I hear the expats shout, as non-resident taxpayers face withholding taxes and are not required to pay provisional tax. True, I agree but non-resident for purpose of the provisional tax exemption, refers to a person that is either actually tax non-resident or was never tax resident and to a person exclusively tax resident of another country in terms of an applicable double tax treaty.
SA expats residing in the USA relying on anything less than a green card is probably exclusively tax resident in South Africa, as the SA Expats in Australia are exclusively SA tax resident (normally) until they receive a Permanent Residence (PR) Permit. The USA PR obviously is the green card and most others are not adequate to change the tax treaty tie breaker outcome.
OK, so we agree that true tax non-resident expats or “Wegkaners” are not liable for provisional tax yet there is other tax compliance issues they need to consider.
To claim tax credits in for the Feb 2013 RSA tax year, usually they should have paid the foreign taxes by end of February. No benefit in leaving the USA December taxes due until say June or July of this year. It is a little late to pay SA taxes end Feb 2013 and try to claim the IRS credit end December 2012. The credit will most definitely be applied to the USA 2013 tax year.
In the case of UK and Australia, the Wegkaners have time until April 5th and June 30th, respectively, to pay the SA taxes they intend claiming as a 2013 tax credit.
True non-resident expats in receipt of SA sourced pensions need to re-apply for the treaty exemptions in respect of local monthly payroll tax (PAYE) on the SA sourced monthly or annual pension and annuity benefits. Despite the treaty rules limiting SARS taxing powers and the introduction of the form IT24 to be date stamped by HMRC, we have seen no mirror process being installed in SA. Luckily we can now apply for a SA tax residency certificate (TRC) where there is a need to have a treaty tie breaker dispute resolved, but then we’re stuck. No processes within SA and SARS webpage dealing with Expats are a disgrace and a shame. It refers to tax filing season 2011 which is for calendar year 2010 income.
It is true, that South Africa wishes to play in the international arena and one can easily be impressed by the number of treaties the current regime has signed up and re-negotiated yet they are of no real value where the due process is lacking. Why bother about FATCA or no FATCA negotiations, let the SA funds investing from SA in USA suffer the withholding taxes. Our treaty rights and the unilateral section 6quat tax credit regime will protect the investor.
What is of greater importance is our internal due processes being beefed up allowing SA to truly negotiate on the same foot as the USA? Now that is a topic we will not further discuss in South Africa: getting a foot in a door and having legs to stand on…Valentine’s Day to tax year-end February has always been dreaded by accountants yet loved for the recurring work about the happen, but I guess in SA nothing will be the same ever again. As I end this blog I hear the news reporter mention USB sticks with foreign bank details found in a safe…. . Why oh why do we still live up to the Jones’ and have secret stash in Swiss Chalets….but that is a topic for another day!
Back to reality for the rest of us…it is tax year end and there is so much more to do….let’s speak again early March 2013, that is after tax year end and after the 2013 budget speech in which the Minister of Finance will announce the new 2014 tax rates in SA.
Budget Day is February 27th, one day shy of tax year end.
Connect with: Hugo van Zyl
20 February 2013