expat: do i owe tax?
16 July 2008

Willie writes:
I have been living abroad since February of 2006 and have not filed any tax returns since I have been out of the country simply because I neglected to do so. I am now worried about the implications thereof.

Marica Gerber of Camira Registered Accountants and Auditors responds:

All South African residents are obliged to pay income tax. For tax purposes, Willie is considered a resident if:
he spent more than 91 days in SA in that tax year;
he was in SA for 91 days during each of the five tax years before that; and
he spent more than 915 days during those five preceding years of assessment in the country.

Residents, who earned income abroad, can't be taxed on that income if:
The remuneration was received outside of SA and the employer is a foreign company;
The person lived outside of SA for more than 183 days in that tax year; and
The person was outside South Africa for a continuous period of more than 60 days during a 12-month period.

Willie left South Africa in February 2006. For the tax year, which ended at the end of February 2006, he was in SA for more than 91 days. So for that year, he was a resident and should have paid tax on his income.  Depending on the amount of tax payable for the 2006 tax year, there will be a 10% penalty for the late payment of the tax outstanding as well as penalty on the late submission.   Interest will also be levied on the penalty amount at a rate linked to, but not equal to, the current interest rates.

If Willie was an employee for a specific enterprise during the 2006 financial year, he must obtain an IRP5 certificate from his employer. If any annuity payments and medical contributions were made, these certificates also have to be obtained. The income tax return then has to be completed and handed in. The amount of income tax payable or receivable will then be calculated by SARS, as well as the amount of the penalty (if any) and interest.

These amounts then have to be paid over to SARS. If Willie was linked to his employer's monthly pay-as-you-earn (PAYE) system, it is likely that only a small amount, if any, will be payable. He might even receive a refund. For the subsequent two tax years, he wasn't physically in SA and can't be considered a resident. He shouldn't pay tax, but the 2007 and 2008 income tax returns should be handed in as zero returns.  If he wanted to apply for tax clearance in his personal capacity, SARS will only issue the clearance if there is no money or returns outstanding.

Camira offers auditing, business intelligence, basic and advance tax solutions and business start-ups with statutory service. Contact them at 086 111 5227.

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