South African Expatriates Face Intensified SARS Scrutiny on Global Income

The South African Revenue Service (SARS) has significantly amplified its efforts to monitor and enforce tax compliance among expatriates, indicating a new era of stringent oversight on global income. South African expatriates who earn over R1.25 million abroad have found themselves the prime targets of this amplified scrutiny, following the amendment to Section 10(1)(o)(ii), commonly referred to as the Expatriate Exemption.

Now, as the tax landscape becomes tougher and more interconnected, expatriates are racing to understand the implications for their finances, careers, and most importantly, their compliance with South Africa's tax regulations.

SARS's assertive stance became unequivocally clear when it set up a 'foreign employment' unit, placing expatriates under a magnifying glass. This has been further highlighted by the launch of the Notice of Non-Resident Tax Status confirmation letter, a clear signal that SARS means business.

The seriousness of being audited by SARS cannot be overstated. An audit involves rigorous examinations of financial statements, tax returns, and related activities, looking for accuracy and adherence to tax laws. It’s a deep dive into the individual’s fiscal behavior, and expatriates are advised to handle these with precision and depth, avoiding the temptation of superficial, quick fixes that provide scant long-term protection.

With the inception of the Common Reporting Standards (CRS) driven by the Organisation for Economic Co-operation and Development (OECD), the world of tax reporting has undergone a profound change. The CRS signals the end of the offshore hide-and-seek for income as countries globally exchange taxpayer financial information, leaving little room for evasion.

South African expatriates are affected by these developments: the CRS means that SARS now has access to more data to track foreign earnings that exceed the exempt threshold. The introduction of these international reporting standards has made the act of concealing overseas income not only unlawful but also increasingly impractical.

To add to the seriousness, the Tax Administration Act now includes the terms ‘wilfully or negligently’ — making it crystal clear that ignorance or inadvertent non-compliance offers no protection from prosecution, which could lead to imprisonment or substantial fines.

With these factors in mind, South Africans residing abroad are strongly urged to review their tax status and engage with SARS proactively. Expatriates need to operate with an abundance of caution and a proactive mindset to ensure that they fulfil their tax obligations. The days of passivity are over; conscientious engagement and compliance are the only paths forward for those who wish to avoid the risks associated with a SARS audit.

Roxanna Naidoo, an admitted attorney at Tax Consulting SA, reminds expatriates that the clock is ticking and that taking immediate measures to align with tax legislation is not just judicious but critical to secure financial peace of mind.