Twitter and email bulletins issued by Softbyte Computers

regarding tax and investment related matters.

Issued 7th March 2019.

Treasury and SARS officials held a meeting with stakeholders yesterday Wednesday 6 March regarding the new “Expat tax” amendment to law to come into effect 1^st March 2020.  The government made it clear that it is definitely going ahead and will implement this new amendment.

Reports from those coming out of the meeting offer no joy and, in fact, the reports regarding some of the comments made by the panel from Treasury and SARS could be construed as being a bit scary.  Apparently stakeholder’s submissions regarding implementation issues were not well received by Treasury.  Treasury said words to the effect “make as many submissions as you wish, we will look at them, but we only take instructions from our political superiors”.  Treasury seem disinterested in the fact that the forex value of fringe benefits for travel and accommodation etc offshore will inflate remuneration earned overseas to a point where the R1m exclusion on income, offered by SARS, means very little.

It is the view of many in the tax, financial and labour industries that this new law will severely affect many highly skilled self-employed South Africans, who currently work offshore and bringing back millions of Rands in forex to South Africa every year.  These people will look seriously at financially emigrating as soon as possible and who can blame them?  If they continue as they are then the new expat law will cost them a fortune and we all know that, once they are gone, they are gone for good.  SA citizens who are employed by SA companies and are sent to work in other countries will find that they, also, will be worse off financially and so will be extremely reluctant to take up offers to work overseas for their company.  SA companies will now have to contract workers resident in the foreign country which will cost the company even more and the money the SA companies pay to foreign workers will be lost to South Africa.  This will also lead to a lot of SA companies losing lucrative foreign tenders and contracts.

Unless SARS re-writes sections of the tax act, including s6quat, the only real money SARS will make will be from SA taxpayers working overseas in countries where no PAYE is deducted in that foreign country but the new expat law will also affect SA citizens working in countries where tax is deducted in that foreign country.

Issued 25 February 2019.

National Treasury is willing to hear concerns regarding the new tax  legislation for SA citizens working overseas and has called for ‘stake-holders’ meetings, starting 6 March, to hear these concerns.

The main concern appears to be that this new legislation will cause South Africa to lose a flood of highly skilled and experienced people currently making plans to emigrate and the new legislation will be counter-productive for the country.  I am sure that, by now, all tax consultants are aware of the how the new legislation will work so I won’t bore you with the details but the main objections voiced centre around the R1m exemption on foreign income.  Most of the terms of foreign employment under discussion here include fringe benefits such as travel flights, accommodation, food etc and these taxable fringe benefits increase the SA citizen’s foreign income earnings dramatically and making a mockery of the R1m exemption.  Will a change in this R1m exemption amount be enough to stem the flow of skilled South Africans emigrating?

We will keep you informed of anything we hear coming out of these meetings.

Issued 15 February 2019.

If you over-pay taxes on your provisional estimate then, sure, you will get this money back but only in about a year’s time – after your assessment and after any audit if you are due a refund.  If you don’t feel like giving SARS a loan for a year then make sure you do not over-pay on your provisional estimate.  Pay only the amount of tax you are due to pay!

Do not forget to claim MTC’s (Medical Tax Credits) when completing your Provisional Estimate.  MTC’s are not merely as a deduction but are treated as a rebate and so come straight off the tax you have to pay.  Medical tax credits could make a difference of tens of thousands of Rands to your tax commitment.  The MTC calculator on the Prov Tax screen in WinTax2019 will calculate your tax credits for medical aid members/beneficiaries as well as for out-of-pocket medical expenses and medical aid fund contributions.

Issued 22 January 2019.

The Taxation Laws Amendment Act was amended, last Thursday, with regard to the way that SARS treats trading in crypto currencies such as Bitcoin etc.  The bottom line is that while profits from trading in crypto currencies are taxable, like any other financial instruments, losses from trading in crypto currencies are now ‘ring-fenced’ and can only be offset against profits on other crypto currency transactions.  For more information please click on this link https://www.businessinsider.co.za/cryptocurrency-is-now-a-financial-instrument-for-tax-purposes-after-law-change-2019-1

Issued 18 January 2019

Many skilled South Africans have accepted employment opportunities in foreign countries for lengthy periods such as for most of the year or even for several years continuously, and so legally avoided paying tax in South Africa.  SARS has always treated these people as “non SA residents for taxpaying purposes”.  SA adopted a “residency-based” income-tax system on 1^st March 2001 and this basically means that a person pays income tax in the country where they live and work for most of the year.  If a SA citizen lives and works in a foreign country with a DTA, such as the UK for example, for most of the year then they should be treated as a UK taxpayer and pay income tax in the UK.  This also means that if they spend most of the year living and working in a country where there is no personal income tax, such as Saudi Arabia for example, then they pay no income tax in Saudi Arabia and no tax in SA so they pay no income tax at all.

SARS has now changed the tax laws in SA (Taxation Laws Amendment Bill Dec 2017) and SA citizens working overseas will pay income tax on a portion of their offshore earnings to SARS.  This is now law and the law will come into effect on 01/03/2020 which gives those affected time to arrange their working schedules.

If there is a DTA in place, the first R1m of salary/income earned offshore will be exempt from tax and SARS’s normal tax rates will apply to the balance of income earned.  This means that, if a person earns R1,100,000 in foreign salary/income then the first R1m will be exempt from tax in SA and SARS will tax them on the R100,000 balance.

There is no distinction between salary/income earned in foreign countries where tax is deducted and foreign countries where no tax is deducted.  This means that if R1.1m salary was earned offshore and R300K tax was deducted offshore then SARS would say that R300K in tax was deducted offshore on what SARS sees as R100K income (because R1m of the R1.1m is exempt).  In terms of s6quat and using current tax rates, SARS would say that, if the R100,000 was earned locally then only R18K would have been deducted locally so you can only claim R18K of the R300K taxes deducted offshore on your tax return as allowable taxes already paid.  Many people working in foreign countries enjoy fringe benefits such as accommodation, the occasional free flights home etc, as part of their contracts, and SARS sees all these benefits as part of taxable foreign earnings.  If a SA citizen works in Saudi Arabia for a year and earns R2m then no income tax is deducted in Saudi Arabia.  SARS will exempt R1m of the income and SARS will levy over R300,000 in income-tax on the R1m balance of the foreign income earned (using the current 2019 tax tables in this example).

To avoid this situation, taxpayers will have to consider emigrating financially and not merely ‘relocating’. Merely re-locating to a foreign country for a time and keeping your SA passport is not good enough.  We all live in the same “global village” where everything is interconnected.  Financial institutions all over the world are linked to tax regimes in all countries and SARS will find you unless you have officially emigrated.  If you have a bank account opened in a foreign country using your SA passport then SARS will have access to that bank account’s transaction records.  Tax regimes around the world work together.  SA banks have to provide Revenue Canada, for example, with transaction records of accounts in SA held by Canadian passport holders.

Because this new law only comes into effect on 01/03/2020, there is still a small chance that minor amendments could be made before then but tax practitioners and financial consultants should advise their clients accordingly if this new law applies to any of their clients.

WinTax will cater for all these new changes as soon as they happen.

Issued 2 January 2019

Tax consultants, accountants and tax practitioners are now able to pre-order copies of WinTax2020 for the tax year starting 01/03/2019 in order to ensure they receive the first copies we release after the budget is read in February 2019.  Order forms are available on our web site.

Issued 5 December 2018

We are pleased to announce that South Africa’s biggest financial institution has purchased a license agreement to distribute WinTax2020 to their staff, tax lawyers and consultants.  The institution has bought a WinTax license every year for the past 21 years.  WinTax2020 will be released within a few days of the budget being read in February 2019.