Pretoria – Although the South African Revenue Service (SARS) has an important role to play, it must do so within the confines of the law, the Tax Ombud said.

Speaking at the launch of the Tax Ombud Office’s annual report for 2016/17 on Tuesday, Judge Bernard Ngoepe stressed the importance of his office as a watchdog.

“We don’t like SARS to adopt a ‘skop and donner’ attitude, we want them to treat people fairly,” he said. Treating people fairly will inculcate in them a sense of responsibility and they will comply with their duties.

Given that South Africa is a constitutional democracy, every institution’s exercise of authority must be subject to some counterbalance, he said.

During his address Ngoepe lamented that his office had to approach the Finance Minister to get permission to conduct an investigation into SARS’ systems.

• READ: Tax Ombud gets nod to investigate SARS

The office had received innumerable complaints related to a delay in refunds. In September, the ombud released a report that indicated that it was indeed systems in place at SARS that were inadequate in addressing issues raised. The ombud made several recommendations and highlighted that the delay in refunds had negatively impacted the financial position of taxpayers.

Speaking at the Tax Indaba last month, SARS commissioner Tom Moyane, noted the findings of the report and apologised for the “glitches” which have caused an inconvenience and said that SARS would continue to improve its systems.

• READ: SARS system behind delay in tax refunds, ombud finds

On the relationship between the office of the Tax Ombud and SARS, Ngoepe said that while SARS has a right to collect tax, his office ensures that the tax authority does so in accordance to the law.

In turn the Tax Ombud does not enable taxpayers to evade their obligations. He urged SARS to follow recommendations, or at the very least give reasons why they will not implement the recommendations as a matter of good governance. “This impacts the morale and the confidence people have in the system.”

Ngoepe said there is also misunderstanding between SARS and taxpayers which leads to “hitches”. He made an example of when SARS issues a final letter of demand. SARS should also inform taxpayers of the options they have available to them, which they have not done in the past.

Ngoepe added that given the number of complaints received since its establishment in 2013, he said there was a legitimate need for his office. “It was not a mistake to establish the office of the Tax Ombud, it was the right thing to do,” he said. “We are very lucky to have the office of a Tax Ombud. Not every country has this mechanism.”

Among the main findings of the report show that the complaints received grew 62%  from 2 133 in the previous year to 3 454 in 2016/17. Of these, 1 722 were rejected as they did not fall within the mandate of the office, and 1 270 complaints were accepted. Only 462 complaints have not yet been validated.

Most of the complaints reviewed are related to dispute resolution (39.51%), followed by refunds (24.90%) and debt (8.32%).

During the period a total of 621 complaints were finalised, 86% of these were in favour of complainants.

Dubai is a popular destination for expats from all across the globe, not just for the opportunities it promises but also for the lure of living a ‘tax-free’ life. The UAE is known as a tax-free country, but what does that really mean for those living here or for expats looking to move to Dubai? Here, we explain the ins and outs of taxation in Dubai and everything you need to know about working and living here from a taxation point-of-view.

To answer the question on everyone’s mind, yes! Dubai is largely a tax-free country with massive tax advantages for those who live and work here, but there are circumstances in which you will be required to pay taxation in some form. The UAE has been toying with the idea of introducing income tax in the country for a long time; in 2010 there were alarming headlines screaming about Dubai residents having to prepare to pay taxes but these turned out to be measures imposed by the Emirate of Dubai to collect fees from car registration, road toll and Emirates ID cards, Which is a form of taxation, but not really of any significance compared to individual earnings in the emirate.

Income Tax

The UAE Federal Government does not impose taxes on the wealth of companies and individuals in the UAE, and contrary to some reports, the ruling family of Dubai has indicated that Dubai will never resort to taxation as a means of relieving debt, so it is unlikely that we will see any income tax levied in the years to come. However, if you are earning an income in Dubai, but are a tax resident of another country, you may be liable to declare your income and pay taxation on it. For example, if you are a tax resident of the UK and you own a property in Dubai that you earn a rental income from, you are required to declare this income on your British tax returns and may potentially have to pay tax on it, subject to certain conditions. The same is true if you move to the UAE for 6 months to live and work here but remain a tax resident of the UK; in this case you are likely to be subject to taxation in the UK. Alternatively, if you move permanently to the UAE and are out of the UK for a full tax year, you may be able to earn a 100% tax-free salary in Dubai under the following conditions as published on the HMRC website:

• If you are absent from the UK and not employed in the UK for more than one full tax year
• You spend less than 183 days in the UK during the tax year
• You average less than 91 days a tax year during your visits to the UK for a maximum period of 4 consecutive years (normally, for tax purposes days of arrival and departure are not counted as days spent in the UK).

However, each person’s circumstances are unique and it is advisable to consult an accountant or oversees tax consultant. More information on income tax when leaving the UK is available here.

Corporate tax

Each emirate has its own laws on corporate taxes for companies operating within the emirate, but in reality taxes are imposed only on the following entities:

• Foreign gas or oil producing companies dealing in oil or hydrocarbon production within the UAE. Although the tax rates are generally 55% of the company’s operating profits, they vary based on individual agreements between the company and the emirate in which it is operating. These agreements are usually confidential and rates may range from between 55% to 85%.
• Branches of foreign banks operating within each emirate are subject to corporate tax, although not all emirates enforce this law. In Sharjah, Dubai, Abu Dhabi and Fujairah, foreign banks are subject to tax rates of 20% on their taxable income. There may be sligh variations in the rate from emirate to emirate.

Furthermore, there are no withholding taxes levied on companies who remit income outwards whether it be dividends, royalties or interest.

Indirect Taxes

Contrary to popular belief, there are many other taxes levied in Dubai and these are taxes that individuals who live here would pay on a regular basis. The emirate of Dubai levies a 10% municipal tax on hotel revenues and entertainment. So whenever you visit a hotel in Dubai for a stay or even a meal, 10% is added to your bill. Alcohol imports are heavily taxed – you pay 50% to bring alcohol into the country and a further 30% on purchase of alcohol (legally with a liquor license) for home consumption, which is why many people choose to purchase alcohol illegally. All the emirates, with the exception of Abu Dhabi, levy a tax on income from rentals – municipal tax of 10% is levied on the rental of commercial premises and 5% on the rental of residential premises. Abu Dhabi does not levy tax on rental incomes, but landlords do have to pay annual license fees. Taxes are also levied by DEWA (Dubai Electricity and Water Authority) on utility bills. In addition to this, Dubai has a system of road toll known as Salik, which has been set up on all major roads leading into and out of Dubai. Every time you drive across a toll road, you pay AED 4; up until a year ago there was a cap of AED 24 that could be paid out in Salik on any given day, but this cp has since been removed; you now pay toll as many times as you use the road.

Double Taxation Avoidance Agreements

The UAE has signed a number of DTAAs with countries to ensure that individuals do not get stuck paying tax to two different governments on income earned in one country. A list of countries with which a DTAA has been signed or is in process can be found here.