SARS warning for South African expats

South African expatriates risk severe financial penalties or even criminal prosecution if they under-declare income or fail to cease tax residency properly, as SARS now uses global data-sharing and AI tools to identify non-compliance.

Tax Consulting SA’s expatriate tax specialist Mbalenhle Mahlaba, SARS compliance specialist Alex Mahundla, and tax attorney Junaid Bhayla warned that taxpayers should avoid criminal summons at all costs.

“In terms of the Tax Administration Act, the accused is obliged to submit tax returns for assessment by a specific return date,” the summons reads.

“The accused failed to submit 4 Personal Income Tax returns. Now, therefore, the accused is guilty on 4 counts of failure to submit a Personal Income Tax return.”

Mahlaba, Mahundla, and Bhayla cautioned that the taxman has wide powers and discretion to impose administrative penalties.

Depending on the gravity and intent of the contravention of the Tax Administration Act (TAA), SARS can even pursue criminal prosecution.

“South Africans living abroad should note that being outside the country offers no automatic protection for non-compliance,” they said.

“In fact, expatriates may be particularly vulnerable if the income they declare is not aligned to their tax residency status as per SARS’s records.”

According to Mahlaba, Mahundla, and Bhayla, many expats fall into non-compliance unknowingly due to misconceptions or being ill-informed about South Africa’s residency-based tax system.

“Unless you have ceased tax residency through a structured cessation process, SARS still considers you a South African tax resident.”

This means they are legally required to declare their worldwide income, including foreign employment earnings, consulting fees, dividends & interest, rental income, or capital gains.

“Expatriates who have not formally changed their status to that of non-resident taxpayer, run the risk of under-declaring their income by only declaring South African-sourced income,” they warned.

“Even when unintentional, it is classified as non-compliance and carries substantial financial and legal risks.”

Penalties add up quickly

Mahlaba, Mahundla, and Bhayla explained that someone’s failure to declare full income according to their tax residency status can lead to –

• Penalties up to 150% of the unpaid tax
• Compounded interest charges that escalate over time
• Retrospective assessments and backdated audits
• Possible criminal charges for intentional tax evasion

“Interest on unpaid taxes is also levied under Section 187 of the TAA and Section 89 of the Income Tax Act, escalating liabilities over time,” they said.

“Section 234 of the TAA makes express provision for criminal offences arising from non-compliance with tax Acts.”

The aim is to enforce taxpayer compliance and deter wilful or negligent conduct that could undermine the integrity of the tax system and the administration of revenue collection.

“The inclusion of criminal sanctions within the TAA underscores the seriousness with which SARS and the legislature regard accurate reporting, timely disclosure, and voluntary compliance in tax administration,” they said.

Mahlaba, Mahundla, and Bhayla explained that South Africans living and working overseas face heightened exposure for several reasons –

• Misunderstanding of tax law – Many incorrectly assume that working abroad exempts them from declaring foreign earnings
• Minimal declarations – Some declare only South African rental or bank interest, thinking it is sufficient
• “Nil returns” trap – Many expats file returns showing unemployment, wrongly assuming SARS will ignore them

“These behaviours are risky because SARS has visibility into foreign income, and in many cases, already knows more than you think,” they said.

Mahlaba, Mahundla, and Bhayla warned that the tax authority’s reach is not limited to domestic data. It also receives financial and personal information through the Common Reporting Standard (CRS) and other international agreements.

“This includes data from foreign banks and financial institutions, property deeds offices, retirement fund administrators, and investment platforms,” they said.

“Using advanced data analytics and machine learning, SARS cross-checks this information with declared tax returns to detect discrepancies.”

They said SARS also has a Foreign Employment Income Unit, responsible for monitoring expatriates, particularly those earning above R1.25 million annually.

It ensures expats remain tax compliant and issues Non-Resident Tax Status Confirmation Letters to those who have formally ceased residency.

The unit also leverages international data-sharing mechanisms to verify foreign-earned income. “These tools mean SARS is proactively identifying non-compliant taxpayers,” Mahlaba, Mahundla, and Bhayla said.

“Ceasing South African tax residency is essential for individuals who have relocated abroad. Without formally applying to SARS, you remain liable for tax on worldwide income and assets.”

“Once approved, non-resident status changes how your global income is taxed and helps prevent double taxation.”

Given SARS’ use of global data-sharing and AI audits, they stressed that prompt compliance is vital, as the cost of inaction far exceeds any short-term benefit of avoiding disclosure.

SARS evaluates a taxpayer’s conduct to determine the level of penalty imposed. According to section 223 of the TAA, penalties for understatement, in a standard case, range from 10% to 150% –

Behaviour	Penalty (% of Shortfall)	Explanation
Substantial understatement	10%	Large omission but possibly unintentional.
Reasonable care not taken	25%	Carelessness or lack of due diligence.
No reasonable grounds	50%	Aware of obligations but failed to comply.
Gross negligence	100%	Reckless disregard of tax duties.
Intentional tax evasion	150%	Deliberate concealment of income.