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Sars plans to tax retirement funds if you leave SA, target offshore assets

24 February 2021 8:42 PM
Tags:
SARS
The Money Show
Retirement
Bruce Whitfield
Tax
Tax payers
pension fund
tax revenue
Retirement funds
offshore investing
offshore holdings
undisclosed assets
Prof. Osman Mollagee
government revenue
Voluntary Disclosure Programme
VDP
Denver Kesswell
tax breaks

The proposal to tax retirement fund members when no longer tax-resident in SA is not unreasonable, says Prof. Osman Mollagee.

Saving for your retirement is rewarded with tax breaks in South Africa.

But what happens in terms of your pension fund if you decide to leave the country after you stop working?

Treasury now intends to tax retirement fund members when they are no longer tax-resident in South Africa says Denver Kesswell, senior legal adviser at Nedgroup Investments.

He spoke to The Money Show after Finance Minister Tito Mboweni presented the 2021 Budget.

Should they decide to leave their funds here they will be taxed when they access it at a later stage. In this way Treasury ensures that South Africa does not forfeit any tax to other countries in terms of double taxation agreements and ensures that South Africa receives any tax due.

Denver Kesswell, Senior legal adviser - Nedgroup Investments

It's been a point of concern for a while, says Professor Osman Mollagee (tax partner at EY South Africa) in conversation with Bruce Whitfield.

He points out that the country already has pretty stringent exit regulations in place.

This also means that a lot of the wealth that you would have built up while you were here, this proposal makes sure we get a piece of that as well.

Prof. Osman Mollagee, Tax partner - EY South Africa

Would a tax payer be justified in finding the proposal unreasonable?

From a policy rationale perspective there are arguments for both sides, Prof. Mollagee says.

Ultimately, government is saying that in terms of double tax agreements they'll make sure that where you're taxed is in South Africa.

All of that wealth sitting in those funds was built up while you were here; while we were supporting you as a country - that would be the argument why SA would have the entitlement to tax it.

Prof. Osman Mollagee, Tax partner - EY South Africa

This goes to the general point about tax morality, that you should expect to be taxed somewhere.

Prof. Osman Mollagee, Tax partner - EY South Africa

At the same time, while government might not be hiking taxes in terms of Budget 2021, the South African Revenue Service (Sars) is "increasing its focus" on wealthy individuals and offshore holdings.

© Andriy Popov/123rf.com

In a statement, the revenue service says while it works hard to make it easy for tax payers to fulfill their obligations, it's equally important to make it hard and costly for those who do not comply.

To this end Sars is establishing a separate unit focusing on individuals with wealth and complex financial arrangements, which are often offshore.

Listen to the interview with Prof. Mollagee on The Money Show:




24 February 2021 8:42 PM
Tags:
SARS
The Money Show
Retirement
Bruce Whitfield
Tax
Tax payers
pension fund
tax revenue
Retirement funds
offshore investing
offshore holdings
undisclosed assets
Prof. Osman Mollagee
government revenue
Voluntary Disclosure Programme
VDP
Denver Kesswell
tax breaks

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