SARS causing problems for South Africans living abroad

The South African Revenue Service’s (SARS) unclear and slow processes regarding tax relief for expats are a root cause of mounting confusion and frustration among these individuals, who are often left in limbo. 

This is the view of management consulting and accounting firm Latita Africa, which said South African expats abroad need to navigate increasingly turbulent and uncertain waters regarding taxes. 

The firm explained that many expats rely on relief in Double Tax Agreements (DTAs) to avoid being taxed twice on the same income.

“However, in some areas, it seems there may be a blind spot from a tax administration perspective, with concerns increasingly surfacing around applications to SARS, highlighting systemic inefficiencies causing delays in critical decisions,” the firm said.

DTAs provide relief where an individual is a tax resident in another country – and tax non-resident in South Africa. 

These individuals may be eligible for relief from South African tax on their South African pensions and annuities. 

South Africa has 22 DTAs that provide for this relief, including those in place with the UK and New Zealand, for example.

However, a DTA does not automatically apply, and a taxpayer must claim these relief measures. “When it comes to claiming DTA relief, however, it gets problematic,” the firm said.

The firm explained that if someone has been a tax non-resident for three years or longer, they can encash their South African retirement interests as a lump sum payment. 

In other words, they can withdraw their retirement savings as one lump sum.

However, if someone has already made a lump sum withdrawal from their retirement savings and now receives an annuity, this must be drawn down over time up to a max of 17.5% per year.

For example, if someone is retired and has started withdrawing from their retirement funds, they cannot withdraw everything in their retirement savings in one lump sum when they move overseas.

A lump sum withdrawal can only be made after SARS has issued a directive on how much tax must be withheld by the retirement fund provider, who must then follow suit. 

However, claiming DTA relief at the directive application stage to confirm no tax is not possible.

This means that, in practice, many have previously made a lump sum withdrawal but were not aware that they qualify for DTA relief. 

In addition, for those who are aware, it means that they will have to wait until they file their next return and then lodge a dispute against the tax withheld.

“For some expats, this may be a minor inconvenience or no problem at all. But for many others, it means that they may potentially have to contend with double taxation, even if just temporarily,” the firm said.

For expats whose retirement interests have already been annuitised, there is a route to obtain a Nil tax directive from SARS. 

This is done by completing an RST01 directive application form, having it signed and stamped by the revenue authorities in their country of residence, and sending it to SARS.

However, the firm said many expats who do take this route quite simply never get a response.

“This backlog not only impedes efficient business operations but also erodes trust in the tax system,” the firm said. 

“According to one expat experiencing this issue with SARS, ‘the situation is clearly simply untenable for me or anyone in a similar situation’.”

“This is correct. In most cases, while claiming DTA relief from tax on annuities in South Africa is certainly theoretically possible, getting an actual outcome from SARS on the matter is another matter altogether.”

The firm said the lack of transparency and consistency in SARS’ process for these applications, embodied in the lack of clearer guidance from SARS, is a root cause for mounting confusion and frustration. 

“The absence of any structured timeline for the processing of these applications also exacerbates the situation, as they are simply ignored with impunity, leaving taxpayers in limbo for extended periods, often in perpetuity.”


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