Naspers’ corporate restructuring gave SARS the opportunity to show its muscle to collect provisional tax on the first provisional payment. The basic amount is no safe harbour for SARS-targeted taxpayers, and expats are an easy category of taxpayer to target. Owing to expat tax changes, it is common knowledge that the 2019 (last assessed) taxable income will not be the 2021 forecast. Despite having a South African employer, SARS can deem the employee with no other taxable income a provisional taxpayer.
Paragraph 17(5) of the Fourth Schedule to the Income Tax Act provides that SARS may after ‘taking into account any … factors having a bearing upon the probable liability of taxpayers for normal tax, prescribe tables for optional use by provisional taxpayers falling within any category specified by the Commissioner’. To date, less than four weeks before the calculations are due, no such announcement has been included in the final External Provisional Tax Guide (version 21 for 2021 tax year).
Interpretation Note 1 Issue 3 (IN1) was last updated in February 2019. Unfortunately it was not updated following the introduction of the capped FEI exemption.
IN1 states clearly that the reliance on a nil ‘basic amount may or may not fulfil this [obligation under the Fourth Schedule’s paragraph 19 is to submit an estimate of the total taxable income for the year of assessment] … depending on the facts of the particular case. For example, if a provisional taxpayer realised a capital gain during the current year, the use of the basic amount is likely to be inappropriate if the capital gain is significant.’
For expats that had all their foreign employment income tax-exempt in 2020, and especially 2019 tax year (being the last assessed tax year), the August 2020 estimate will probably reflect a nil or very low estimate.
It is submitted that where an expat knows their estimated taxable income for the 2021 tax year will be substantially higher, the basic amount could fail to fulfil the compliance obligations facing expats. One also has to consider the C: SARS paragraph 19(3) rights to increase the basic amount once the IRP6 is filed.