The 2017 South African Tax Season Has Officially Started!

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On July 1 eFilers could begin to submit returns, while SARS branches opened their doors on July 3 to assist taxpayers with their submissions.

With falling economic growth and the determination of the National Treasury to continue fiscal consolidation, SARS is under pressure to meet revenue targets, especially as the tax authority is responsible for raising around 90% of government revenues.

This year there have been changes and we list below some of the things to look out for during this filing season (covering the tax year from 1st March 2016 to 28th February 2017).

Additional disclosure is required

Most agree that this is the most significant change that will affect you as individual South African Taxpayers.

During the current tax season, there are changes to the information you need to provide on deductions for retirement annuity contributions.

You are now required to provide individual policy numbers and the names of the insurers or the funds for each contribution made.

The information requirements relating to medical aid deductions are now being strictly applied and you would be well advised to check the information on your medical aid certificates carefully to avoid delays.

SARS stress that medical aid contributions disclosed on an employee’s IRP5 or IT3(a) certificate will no longer automatically be deemed to be claimed by the taxpayer – any rebate allowed for medical contributions and expenditure will be dependent solely on information supplied in the relevant medical sections of the tax return. The disclosure of medical contributions and medical expenses for an immediate family member who is dependent on you for care and support, must also be disclosed separately in your return.

Trust income from more than one trust must be declared separately.

If you ceased to be tax resident for South African tax purposes during the tax year, you are now required to provide details about when this transpired, as this will have triggered a capital gains tax obligation for South African tax residents.

South African Tax Residence Rules are as follows:

  1. South African Residents are liable to tax on worldwide income and gains
  2. Non South African Residents are liable to tax on South African sourced income and gains

Who is regarded as a tax resident of South Africa?

Contrary to popular belief, living abroad is not enough to be non-resident for South African tax purposes. Unless you have completed the Financial Emigration process with SARS and the Reserve Bank, the rules to decide if you are tax resident are based on two conditions, the Ordinary Resident rules and the Physical Presence test:

  • Ordinary Resident Rules
    • This concept is not clearly defined in the Income Tax Act but Case Law defines your place of residence as the place you “will return to from your wanderings”
  • The Physical Presence Test – an annual test. You will be viewed as South African Tax Resident if you meet ALL of the following tests:
    • You were present in South Africa for more than 91 days in the current year of assessment
    • You were present in South Africa for more than 91 days in each of the five preceding years of assessment
    • You were present in South Africa for 915 days in aggregate in the five preceding years of assessment

As an expatriate you will have a further test:

  • You were NOT exclusively a resident of another country when the DTA between South Africa and that other country is applied in the current year of assessment

If you are deemed to be resident you have an obligation to file and pay South African taxes on your worldwide income and gains – you may be able to rely on the Section 10 exemption in respect of your employment income but this will not apply to investment income and gains.

If you have investments and savings outside South Africa and you wish to ensure that these are as tax efficient as possible, speak to your AAM Financial Planner or email wealthsolutions@aam-advisory.com

Some taxpayers don’t have to file a return

If your total annual salary before any deductions and tax is less than R350 000, you only receive an income from one employer, you have no other sources of income such as rent, taxable interest or a car allowance and you don’t want to claim deductions for medical expenses, contributions to a retirement annuity or travel expenses you probably don’t have to submit a tax return. This threshold is unchanged from last year.

SARS have introduced additional security measures

SARS has implemented additional security measures at its branches for individuals who need to change any of their personal details. To ensure the information is authentic, taxpayers must show their ID, their fingerprints will be scanned, a picture will be taken and the information will be verified with the Department of Home Affairs.

Tax filing deadlines differ
  1. Most taxpayers who submit their returns via eFiling or electronically at a SARS branch must do so by November 24 (non-provisional taxpayers)
  2. All manual or postal submissions must be tendered by September 22
  3. Provisional taxpayers who submit returns via eFiling have until January 31 2018 to meet the deadline

This article is based on AAM’s understanding of current South African tax law and practice which is subject to change at any time.

Sources:
http://www.sars.gov.za/AllDocs/OpsDocs/Guides/LAPD-IT-G02%20-%20Guide%20on%20the%20Residence%20Basis%20of%20Taxation%20for%20Individuals%20-%20External%20Guide.pdf
https://www.moneyweb.co.za/mymoney/moneyweb-tax/tax-season-starts-four-things-you-should-know

Ian Black
Head of Wealth Solutions
AAM Advisory Pte Ltd

Disclaimer:
This article is an op-ed piece by Ian Black. The views expressed in this article are those of the author and do not necessarily reflect the views of AAM Advisory Pte Ltd. This document/article should not be construed as an offer, solicitation of an offer, or a recommendation to transact in any securities/products mentioned herein. The information does not take into account the specific investment objectives, financial situation or particular needs of any person. Advice should be sought from a licensed financial adviser regarding the suitability of the investment product before making a commitment to purchase the investment product. Past performance is not necessarily indicative of future performance. Any prediction, projection, or forecast on the economy, securities markets or the economic trends of the markets is not necessarily indicative of future performance. Whilst we have taken all reasonable care to ensure that the information contained in this document is not untrue or misleading at the time of publication, we cannot guarantee its accuracy or completeness. Any opinion or estimate contained in this document is subject to change without notice. The above report may contain data obtained from third parties and as such we cannot guarantee the accuracy of this data.