Cross-border finance is becoming increasingly common. More and more people are either investing offshore, or moving abroad and moving funds between different jurisdictions.
But although the process of transferring funds between countries may seem relatively hassle-free and straightforward, it’s not as simple as it seems.
What about your taxes?
Fund transfers generally only require two different bank accounts and a few clicks. At least, that’s what most people assume. And many South Africans living abroad or investing offshore mistakenly, or by choice, believe this overly-simplistic process to be legitimate. But what about your taxes?
Have you taken the care to ensure that you adhere to the distinct regulations of each jurisdiction within which you have earned money or transferred funds to? Do you know the fund and taxation rules for each of your investments and pensions, and have you completed all the necessary paperwork to ensure that you are within your rights and your earnings are legitimate?
If you’ve skimmed on the admin thus far, you’d better pull up your socks, as SARS is set to come down hard on tax evaders in 2016, thanks to the Organisation for Economic Co-Operation and Development (OECD) and its Common Reporting Standard (CRS).
What is the CRS and how will it affect you?
The CRS is a set of global standards governing the exchange of information between the 70 participating G20 countries. Essentially, participating countries will share income, expense and asset information for residents or investors operating within their respective jurisdictions. The exchange of information will clamp down on tax evasion and ensure that different jurisdictions receive the taxes due to them.
Most countries who have signed up for CRS started collecting data on 1 January 2016 and will make the first exchange of information in September 2017. There are, however, a few countries that will only start collecting data in 2017. But don’t let this fool you into believing you can evade the tax man, as tax evasion could see you pay substantial penalties and lead to criminal prosecution.
Under normal circumstances, tax evaders stand to receive a 10% penalty for intentional tax evasion and 5% for gross negligence, provided they’d made a voluntary disclosure to SARS and have not been subject to an audit. Penalties for the abovementioned offences under an audit could see the figures increase to 75% and 50% respectively and will likely increase further once the CRS is operational.
Make sure your taxes are in order
There is an olive branch for South Africans who have evaded taxes thus far in the form of the Voluntary Disclosure Programme (VDP). If you have not yet been audited, you may possibly be granted relief from criminal prosecution under the VDP.
The best course of action, however, is to ensure your earnings and transfers are lawful and that all your taxes are filed periodically as required by the respective jurisdictions. Understandably, many individuals don’t understand exchange control and other legislative regulations governing their finances in different regions. It is also common for people to side-step required administration due to unfamiliarity with tax relief directives – they are not aware that they stand to receive relief or tax refunds due to double taxation agreements or tax incentives.
Leave your tax issues in capable hands
finglobal.com exists to assist South Africans living abroad and those with offshore assets with their financial migration needs. We are one of the only companies with the specialist knowledge and accreditation necessary to facilitate and administer all-inclusive cross-border financial services.
We understand the diverse rules and regulations for respective policies and fund transfers and have an in-depth knowledge of taxation and exchange control regulations in South Africa and abroad.
Entrust your tax needs to finglobal.com and ensure that you stay on the right side of the law. Simply leave your details and we’ll call you for an obligation-free consultation.[contact-form-7 id=”6581″ title=”Blog post (call me)”]