South African taxpayers face two high‑stakes tax developments in the coming year - both tied to SARS’s intensified enforcement drive. The first issue centres on undeclared foreign properties. The second relates to Permanent Establishment (PE) risk, which poses significant challenges for both non-resident companies operating in South Africa and South African businesses expanding overseas however in this article we will focus only on South African businesses operating potential PEs in foreign tax jurisdictions.

Foreign Property in SARS’s Sights

Under the Multilateral Competent Authority Agreement on the Exchange of Readily Available Information on Immovable Property (IPI‑MCAA), SARS is set to gain unprecedented access to data on offshore real estate owned by South Africans. Joining 24 other jurisdictions, South Africa will soon start receiving information on foreign property holdings - exposing apartments in Portugal, holiday homes in Spain, or flats in London previously undetectable via automated reporting systems.

What this means for taxpayers:

• One-off historical data transfers: SARS will receive detailed ownership and valuation records of properties owned by taxpayers - even those acquired years ago.
• Annual continuous reporting: Future acquisitions, disposals, rental income, and capital gains will be automatically relayed to SARS.

Why it matters:

South African tax residents are subject to tax on worldwide income and capital gains. The new system effectively closes the “real estate blind spot.” Those who have remained undeclared are now coming into direct view.

While implementation may not begin immediately, taxpayers currently have a meaningful window to voluntarily disclose and regularise their offshore property portfolios.

Permanent Establishment Risk

Whether foreign companies operate in South Africa or South African firms are going global, Permanent Establishment rules may trigger unforeseen tax burdens.

For South African companies abroad

Expanding into foreign jurisdictions brings its own PE challenges. Establishing a fixed place of business such as offices, depots, ongoing projects or deploying staff to a foreign market can constitute a PE.

Once a PE is triggered, that entity must pay corporate income tax locally, undertake payroll compliance and sometimes register for VAT.

Why this matters:

Increased administrative burden: Setting up local tax registrations, payroll for foreign employees, and handling extra statutory filings.

Unexpected tax exposure: Profits attributable to the PE may be taxed twice—once at home and locally, unless a double tax treaty (DTA) applies.

Penalties and interest: Failure to register or withhold taxes correctly can result in significant penalties and reputational damage.

Planning and Mitigation Tips

For offshore property owners:

Conduct an internal audit of foreign real estate holdings.

Correctly declare rental income and report disposals in your SARS filing.

Use the voluntary disclosure facility to bring previously undeclared assets into compliance before the IPI-MCAA kicks in.

For South African companies abroad:

Scrutinise your international operations for PE exposure:

Do you have an office, site, or staff based abroad?

Are you generating revenue or providing services from foreign locations?

If a PE is triggered, ensure local company registration, tax filings, VAT compliance, and payroll set-up are in place.

Leverage DTAs and professional expertise to minimise double taxation and administrative complexity.

The Bottom Line

SARS is tightening its grip on offshore and cross-border activities. The full transparency offered by the IPI‑MCAA will make declaring foreign property no longer optional. Similarly, PE rules are ensuring tax obligations now apply both to foreign entities in SA and South African firms abroad.

Taxpayers and businesses will benefit from adopting a proactive approach - conduct internal checks, leverage voluntary disclosure options, register where required and seek specialist tax advice. The cost of compliance now is far less than the risk of penalties, interest, reputational damage or disputes later on.

Please note that the above is for information purposes only and does not constitute tax/financial advice. As everyone’s personal circumstances vary, we recommend they seek advice on the matter. While every effort is made to ensure accuracy, Nexia SAB&T does not accept responsibility for any inaccuracies or errors contained herein.

Article prepared by: Stefan Diederiks CA(SA)

Registered Tax Practitioner

 

For any queries or further information, please contact:

•         Mansoor Salee - Director

M: (+27) 82 454 4786| E: mansoor@nexia-sabt.co.za

•         Yousuf Hassen - Director

M: (+27) 82 333 3376 | E: yhassen@nexia-sabt.co.za