A final glimmer of hope for South Africans living and working overseas vanished on 6 March when the National Treasury and Revenue Service (Sars) confirmed that the so-called ‘expat tax’ would not be overturned, amended or delayed.
So, from 1 March 2020, South African tax residents working in another country will be liable to pay Sars for money earned abroad in excess of ZAR1m (£53,165, $69,196, €61,569).
Worldwide, South Africans are venting their fury at a government they believe is targeting them, but adopting a softer approach to those living in the country who have a ‘less diligent’ approach to paying tax.
The lack of clarity around the tax amendment is giving thousands of people sleepless nights, leaving them worried about the best course of action they can take.
Is financial emigration the right step? Can I sell my Cape Town property and fall outside the scope of the tax? Did that recent holiday back home take me over the limited number of days I’m allowed to spend in SA?
The questions are endless, and the answers unclear.
Unfortunately, it all seems to boil down to ‘it depends’.
Getting professional help
The details of the expat tax are not new, but they are rather vague; which is what has been causing problems for those potentially impacted by it.
Whether or not a person falls under the scope of the levy entirely depends on their individual circumstances.
This is where a tax consultant or financial adviser can be invaluable. But not all ‘experts’ are created equal, and it is very important to check the credentials of any so-called professionals you hire.
Financial upheavals don’t always bring out the best in people and these events are prime targets for fraudsters and conmen.
It is important to recognise that financial emigration will not always be the correct course of action – but that won’t stop unreputable firms from recommending it.
Dealing with individuals and companies that are regulated is the best first step anyone can take. But it’s not the only one.
Learn from the mistakes of others
Periods of panic and stress can act as a silent beacon to those blessed/cursed with low morals and selfish natures.
This has been proven, time and again.
Conmen, carpetbaggers, scam artists, fraudsters – they wear many names and are often cloaked with friendly manners.
But charming smiles can hide forked tongues.
Take the British Steel Pension Scheme as an example. Members were given three options after it was announced the scheme would be restructured.
They could either transfer into a less generous workplace scheme, to the UK’s Pension Protection Fund (PPF) or withdraw their funds completely and invest in a personal pension.
The problem was the use of contingent charging, which meant that advisers were only paid if the scheme member opted for the third choice.
This ‘no-win-no-fee’ approach attracted less reputable introducers and advisers and has been shown to incentivise poor behaviour and bad practice.
A report from the UK’s Department for Work and Pensions described some of the advisers who descended on the steelworkers as “vultures”.
The advisers earned money when the funds were transferred out, and also got commission when the money was invested in high-risk, esoteric funds.
The nest eggs of a significant number of steelworkers have been lost or trapped as a result.
What to do
There are some simple, but not exhaustive, steps that can be taken to assess whether or not a firm or individual can be trusted to act in your best interests.
Check their credentials – who are they regulated by? Can you verify this on the watchdog’s website? Ask the firm for its licence number and check.
Internet search – as simple as it sounds, Google the name of the company and the words ‘complaints’, ‘scams’, ‘warning’ etc.
Doubt is healthy – Do not allow yourself to be pressured into making any decisions quickly. Take your time and double check the information you have been given. This may mean it becomes more expensive, but it is worth it if you are better protected.
Fees versus commission – Not all advisers/tax consultants who accept fees are great, neither are all of those who work on commission acting only in their own self-interest. But – paying a fee for a service means that the adviser/consultant has no financial interest in the outcome.
A friend recommended… – Fraudsters often generate more business through word of mouth. It can take years for scams to come to light, during which time the first client has made several recommendations to friends who have also been caught up in the fraud. Even if a recommendation comes from an incredibly trusted source – always do your own homework. Just because a firm/adviser was a good fit for a friend, does not mean they will be a good fit for you.
