NON-RESIDENT TAX STATUS
As a tax resident, you are required to submit tax returns to SARS annually and declare your worldwide income (local and foreign). Non-residents will be taxed only on income that is earned in South Africa, e.g., interest earned from a South African Bank; rental income earned from a property in South Africa; and services rendered in South Africa.
Financial institutions and revenue organisations worldwide are sharing information to ensure that tax is declared and paid correctly. It is therefore imperative that expats review their tax compliance with SARS to avoid penalties and interest being imposed for non-compliance.
It is important to note that you need to formally declare yourself as a tax non-resident with SARS, as this process does not occur automatically.
Who is a tax resident?
A person is a resident for tax purposes in South Africa either by way of ordinarily residence or by way of physical presence. Even though you live in another country, if you spend a significant amount of time in South Africa or have assets and family based in South Africa, you could still be considered a South African tax resident.
Ordinary Resident Test
An individual will be considered to be ordinarily resident in South Africa if South Africa is the country to which the individual returns to after his/her travels. South Africa is considered as the individual’s principal residence.
If a person has ceased to be an ordinarily tax resident, it will be from the day such person ceased his/her residence.
Physical presence test
If an individual is not ordinarily resident in South Africa, he/she may still meet the requirements of the physical presence test and will be deemed to be a resident for tax purposes. You will be regarded as a South African tax resident if you meet all the criteria below:
- If you spend 91 days or more in South Africa during the current year of assessment; and
- If you spend 91 days or more during each of the preceding five years of assessment; and
- If you spend 915 days in total during those five preceding years of assessment.
An individual who fails to meet any one of these three requirements will not satisfy the physical presence test. In addition, any individual who meets the physical presence test, but is outside South Africa for a continuous period of at least 330 full days, will not be regarded as a resident from the day on which that individual ceased to be physically present.
If the individual is neither ordinarily resident, nor meets the requirements of the physical presence test, that individual will be regarded as a non-resident for tax purposes.
Double Taxation Agreement (DTA)
The DTA is an agreement between two countries to avoid the same income being taxed twice, i.e., in South Africa and the foreign country.
An individual who has become a tax resident of another country through the application of a double tax agreement will cease to be a resident for tax purposes in South Africa.
Declaring to SARS that you have ceased to be a tax resident in South Africa?
If you have emigrated, it is advisable to obtain the new “Notice of Non-Resident Status” letter to ensure you are formally recognised as a non-resident at SARS. This document confirms your non-residence and reflects the exact date on which you ceased to be a non-resident. The document will also be required to withdraw any policies from South Africa and receive an inheritance as a non-resident.
A case will be created with SARS and you will be required to submit supporting documents.
Supporting documents:
- A declaration indicating the basis on which you qualify.
- A letter of motivation setting out the facts and circumstances in detail to support the disclosure that you have ceased to be a tax resident.
- A copy of your passport/travel diary.
In addition to the above information, the following documents will also need to be supplied depending on the basis you have ceased to be a tax resident in South Africa:
- The type of visa on which you have gone to the foreign country.
- Where you have already taken up permanent residence in the foreign country, submit proof thereof.
- A certificate of tax residence from the foreign revenue authority or a letter from the authority that indicates that you are regarded as a tax resident in that country (if available).
- Details of any property that you may still have available in South Africa (Indicate the purpose that such property is being used for).
- Details of any business interest (e.g. investment and employment) that you may still have in South Africa.
- Details of your family. Indicate whether any family members are in South Africa and the reason thereof.
- Details of your social interests (e.g. gym contract, recreational clubs and societies) and location of your personal belongings.
- Details of any return visits to South Africa, the frequency thereof and the reason for undertaking such visits.