Where Do You Fit In?

So what does Expat Tax 2020 mean for South African seafarers? SARS knows that seafarers are likely not paying tax elsewhere on their foreign earnings and are often not resident anywhere, likely making them remain resident of South Africa, and thus giving SARS taxing rights on that foreign income.

The position of seafarers is more complex than the standard foreign employee in that South African tax law provides for three different categories of exemption, which can be applied for on foreign income. Even where seafarers work alongside their colleague, one could be exempt from tax in SA, while the other taxable. Something as simple as the mere position held by the seafarer, or the title on the vessel can affect this. Thus, seafarers need to understand the law and how it applies to their individual circumstances to be able to protect their foreign earned income. Our latest guide explores the three categories in detail and lays out some golden rules for South African seafarers to follow.

The following are important concepts to ensure tax compliance –

  • As a South African, you must register for tax where you are tax resident (this means the place you call home and are legally allowed to live), and submit a tax return each year, even if you are exempt from tax. Because it is the law and you do not want to return to South Africa in many years with no good explanation to SARS as to what you have been doing for the time abroad. In the case you have a South African and international bank account, the bank (or any other financial institution) will report you automatically to SARS every year, known as the FATCA (where you have a United States link) and CRS (rest of the world, meaning ‘Common Reporting Standards’). The better approach is to ensure you remain fully compliant with South African law and that you are in good standing (‘tax clearance’) with SARS.
  • Where you claim to be non-resident, there is a formal SARS and South African Reserve Bank process to be followed, commonly referred to as ‘financial emigration’. A key requirement is that South Africa can no longer be your real or your main home, i.e. you have left South Africa permanently to settle somewhere else. This requires minimum that you have a valid work visa and / or residency permit for another jurisdiction. Where you have done ‘financial emigration’, this means that the ‘employment requirement’ (as per explanation above) is no longer applicable to your tax-exempt status. Different rules will then apply to you and we will guide you through that process.
  • Tax compliance and having a tax liability are two different discussions. As a South African resident, you are obligated under law to register for tax and submit an annual tax return. There are certain earnings limits where no registration is needed but working offshore you will be above these de minimis (legal/predetermined minimums) levels and must register for tax. It is a criminal offense to not complete a tax return when due and to make full and correct disclosure therein. This does not only result in an administrative penalty under the Tax Administration Act but can also be used for prosecution.
  • Even where you are pro-actively well planned and tax exempt, you must still complete an annual tax return and claim the tax exemption on your tax return. It is a criminal offence, to make a false declaration, i.e. where you complete a zero-return showing you earned nothing or where you tick the box saving you were unemployed when you were not, this is patently untrue and criminal.

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