TAX RETURN SERVICES
Should You Include Crypto Gains in Your Tax Return?
The Commissioner for SARS prescribes per government notice who is required to submit a tax return. The notice in respect of the 2021 year of assessment was published on 14 May 2021. SARS also posted a webpage on 11 June, aimed at guiding taxpayers to make this determination ahead of the filing season, which started on 1 July 2021.
For natural persons, your return must be filed on or before 23 November 2021, unless you are a provisional taxpayer. If the return relates to a provisional taxpayer, it must be submitted on or before 31 January 2022. South Africans working abroad are legally required to submit annual tax returns, though they can claim an exemption on foreign earnings.
However, SARS has made it clear that crypto asset trading will not be excluded when submitting tax returns, and so require full disclosure of all investments. Regardless of their crypto investment portfolio, all South African taxpayers, whether resident in South Africa or not, will be subject to taxation on their crypto asset gains.
It is therefore imperative to seek the aid of a consultancy that has a comprehensive understanding of tax laws, specifically those that affect the current extent of crypto currency asset trading.
At Crypto Tax Consulting, we offer a holistic and effective service in the calculation and filing of your individual income tax return, provisional income tax returns and any individual tax-related issues pertaining to your crypto asset portfolio; thus, providing an end-to-end solution for investors who are in danger of being non-compliant.
NORMAL TAXPAYER – SOUTH AFRICANS WORKING LOCALLY
This category often comprises of taxpayers who are employed by one employer, who withholds monthly pay as you earn. Other items that will form part of their tax return will be medical aid, retirement annuity and travel allowance claims.
To ensure full compliance, such taxpayers will also need to register for income tax, and timeously submit income tax returns to avoid penalties and interest.
Provisional tax is a preliminary bi-annual tax submission, which seeks to relieve the cash flow burden of an annual tax debt.
Any person who conducts a trade or earns additional income, who is not subject to any withholding tax, must register as a provisional taxpayer.
It’s not uncommon for SARS to “automatically” register people as provisional taxpayers. They are legally permitted to do so where the person should have registered themselves and failed to do so.
SOUTH AFRICAN WORKING ABROAD
Some expats are under the false impression that if they leave South Africa, they are not required to declare their foreign income to SARS, or that they no longer need to submit tax returns in SA.
If you are a South African working abroad, you are legally required to submit tax returns to SARS every year, declare your worldwide income, and potentially claim an exemption on your foreign earnings.
Where applicable, expats can claim an exemption on their foreign earnings under section 10(1)(0) ii. There are specific criteria to be met to qualify for this exemption. It’s important to note that even if you qualify for an exemption, you still need to submit a return to SARS.
FOREIGN NATIONALS IN SOUTH AFRICA
Foreign nationals working in South Africa are subject to normal tax on income earned from a South African source (services rendered in South Africa).
How their employment contract and packages are structured will affect how they are taxed by SARS. It is vital that these are carefully structured from a tax perspective.
Foreign nationals also need to ascertain their tax residency status in South Africa. Dependent on their circumstances they might have become a tax resident. They need to remain cognizant of the physical presence test and the ordinarily residence test.
As a non-resident, they will be taxed only on South African sourced income. As a tax resident, they will be taxed on worldwide income, not just South African income.
PROCESS AND COSTING
Our team follows a set process in dealing with returns. This allows us to submit your returns effectively and accurately the first time.
Initial review: We conduct a comprehensive review (which includes transferring your tax profile onto ours) for first-time accurate tax planning and compliance. R 1,800 (VAT excl.)
Below is the information required to initiate the process:
- Full name and surname
- ID/Passport number
- Tax number
- Banking details
- Residential address
- Telephone numbers
Cost for Submitting Tax Return: please note below our fees to prepare and submit an income tax return. Our fees vary depending on the complexity of the return.
Standard tax return (i.e. includes an IRP5 certificate, medical tax certificate and/or retirement annuity tax certificate declaration) R1,265 (VAT excl.)
Complex return: Where in addition to the aforementioned standard tax return, a declaration requires the inclusion of either an IT3(c) certificate – capital gain event, rental property, consulting/trading income and/or the disposal of property attracting CGT, the minimum cost is R1,980 (VAT excl.) – subject to increase dependent on complexity.
Expatriate or non-resident tax return: For non-resident taxpayers working in South Africa. Or, for South African expatriates working outside South Africa as contractors or employees claiming section 10(1)(o)(ii) exemption at a minimum cost of R2,475 to R4,850 (VAT excl.)
FREQUENTLY ASKED QUESTIONS
- Tax seasons opens on 1 July 2021 for all individual taxpayers.
- However, a significant number of individual taxpayers will be auto-assessed starting from 1 July 2021. These taxpayers will have an opportunity to manually file their returns should they not agree to the auto-assessment.
- Taxpayers who cannot file their returns electronically will have up to 23 November 2021 to submit their tax returns at the branch (by appointment only).
- Taxpayers will have up to 23 November 2021 to file their tax returns online.
- The deadline for electronic filing for provisional taxpayers is extended to 31 January 2022.
The following information is needed:
- IRP5 employee tax certificate;
- IT3(b) and (c) certificates from financial institutions in respect of interest, dividends and capital gains;
- Retirement annuity fund or pension fund contribution certificate:
- Medical Aid certificate of contributions; and
- Travel logbook (related to travel allowances received)
Further to the above, any additional income received by the taxpayer during the tax period must be declared on the return.
You are not required to file a tax return if your income for the tax year is not above the R500 000 threshold, and you meet the following requirements:
- Your remuneration is paid from one employer;
- You have no car or travel allowance, a company car fringe benefit, which is considered as additional income;
- Your employee tax (PAYE) has been deducted or withheld; and
- You did not earn any other additional income such as rentals, dividends, interest, etc.
The odds are high for tax returns to be flagged by SARS for periods where taxpayers are required to submit a return and a return was not submitted, i.e. periods where the taxpayer did not meet all the requirements of the threshold.
SARS takes up to 7-21 business days to process a refund to verified South African banking accounts.
- A taxpayer’s residency status is determined using the residency tests outlined in our Income Tax Act, being the ordinarily residence test and the physical presence test.
- A taxpayer’s circumstances and history will have to be assessed, preferably by a tax professional against the criteria, to determine the residency status of the taxpayer and how they will submit their returns to SARS.
South African tax residents are taxed on their worldwide income and as such, foreign income earned (including fringe benefits and bonuses) by a South African tax resident must be declared to SARS for tax purposes. We offer a potential expatriate tax calculation service to help SA tax residents determine their potential tax liability.
Yes, South African tax residents working for South African employers do qualify for foreign income exemption if they render their services outside the Republic. Please note that the Section 10(1((o)(ii) exemption is now capped at R1.25 million.
Yes, to benefit from the exemption you are still required to declare your foreign employment income and thereafter claim the exemption accordingly.
Yes, even though you have paid taxes abroad in respect of your income earned, your income must still be declared to SARS and be subject to South African tax. It’s important to note that taxpayers who are subject to double taxation may take advantage of the available South African tax treaties to avoid double taxation. This process also needs to be declared and submitted to SARS.
Non-residents with active tax reference numbers will still be required to submit a tax return even where they have not earned South African sourced income. Such a return will be a zero return. The obligation to submit a return will fall away where you have no South African sourced income and have deregistered your tax number. (You may only deregister once you dispose of all your assets in South Africa such as bank accounts, properties, trusts, shares and policies).
Where there is a double taxation agreement signed between South Africa and the State in which you are a tax resident, the double taxation agreement will determine which country has taxing rights in respect of the relevant income earned. Where both South Africa and the State in which you are a tax resident have taxing rights, you will need to claim foreign tax credits from that State in respect of the taxes already paid in South Africa.
The double taxation agreement between South Africa and the State in which you are a tax resident will ascertain which country has taxing rights in respect of such income. Where the double taxation agreement is silent on the matter or there is no double taxation agreement between the two countries, you would need to claim foreign tax credits in respect of the taxes already paid in South Africa in the State in which you are a tax resident.
It is much quicker for SARS to verify and process refunds to a South African account than for a foreign bank account.