When it comes to tax, it always feels like you’re the one owing the South African Revenue Service money, right? Fortunately, that’s not always the case because sometimes SARS is the one that owes you money and you can claim it back. Let’s talk about tax refunds in South Africa.
How Do You Know When SARS Owes You Money?
What is a tax refund?
If you’ve been double taxed or you’ve paid too much tax in this tax year or a previous tax year, SARS will owe you this tax money which they will refund into your bank account.
Tax relief: Getting a refund on South African tax for pension and annuity income (excluding lump sums)
In a residence-based tax system, countries impose tax on the worldwide income earned by their residents, and on the local income earned by their non-residents. In such a scenario it is possible for an individual to be taxed twice – once in the country of residence and once in the country of source where the income was earned.
To avoid this double taxation, certain countries have agreements that income of a certain nature will be taxable in only one country; or if taxable in both, the country of residence will grant a credit for the tax collected by the income source country.
South Africa has agreements with a number of countries to prevent double taxation of income.
Who can use this tax relief to get a refund from SARS?
If you are a non-resident of South Africa (both physically and for tax purposes) and you:
- Receive an income sourced in SA (such as a pension or annuity income); or
- Need a refund on tax withheld from you in terms of the Income Tax Act.
You will need to apply for a directive for the relief from South African tax on pension and annuity income (excluding lump sums). Your request should be made in terms of the Double Taxation Agreement (DTA) that is in place between SA and the country in which you are currently residing.
How to request a Refund for SA Tax Paid on Pension and Annuities
You will need to qualify as a non-resident before you can apply for a refund directive.
- You can apply for a directive for relief from the withholding of Employees’ Tax from your pension and/or annuity income by completing the RST01 – Application by Non-Resident for a Directive for Relief from South African Tax for Pension and Annuities in terms of a DTA.
- The schedules attached to this form must be completed in full. The application should be physically mailed to the address on the directive application form or emailed to SARS.
- The tax office in your country of residence must certify on this application that you are a resident of that country in terms of a DTA between SA and that country.
- Where the DTA allows the source country (here, South Africa) to exempt the income from tax where it is taxable income in your country of residence, you will need to prove that this income was in fact included in your tax return.
How to request a refund from SARS
As a non-resident, you’ll need to be registered in South Africa for income tax. Firstly, the non-resident must be registered in SA for Income Tax purposes. For more information from SARS on this click here.
These are the steps to apply for a refund from SARS:
You must complete and submit your Income Tax Return (ITR12) for the relevant year of assessment. SARS needs this in order to refund the Employees’ Tax that was withheld from the pension and/or annuity in that year.
You will need a copy of the IRP5 – Employee Tax Certificate issued by the fund responsible for withholding the Employees’ Tax.
You can complete your ITR12 and submit it by:
- eFiling, if you are registered. If you aren’t yet registered, it’s pretty simple.
- Appointing a tax representative in SA to submit the ITR12 on your behalf. You’ll need TTPOA – Special power of attorney to empower the representative to deal with SARS on your behalf.
How long does SARS take to pay out refunds?
It’s important to bear in mind that the submission of the ITR12 does not allow for an immediate refund. It’s possible that the ITR12 could be selected for audit and if it wasn’t, an objection must be lodged within 30 days of the date of the assessment after receipt of the Notice of Assessment (ITA34).
In order for SARS to revise your assessment and create a refund on your account, you’ll need to submit the following documentation when lodging your objection or responding to audit selection:
- Your completed RST02 – Request by Non-Resident for a Refund from South African Tax for Pension and/or Annuities in terms of a Double Taxation Agreement form and all the relevant documents listed therein such as bank statements, proof of residence, ID documents.
- A copy of your IRP5 – Employee Tax Certificate.
- Any other documents that were used to complete your ITR12.
- Proof (not older than one yet) that the income was taxed in the resident country, where the DTA allows for SA to exempt the income from tax.
When will a tax refund be rejected by SARS?
An application for a refund may be declined by the South African Revenue Service where:
- SA has the right, in terms of tax law and the DTA, to withhold the tax.
- The RST02 is incomplete or the documents needed to complete the request have not been provided. The documents listed on the RST02 are:
- Stamped copy of bank statement – the first page only – reflecting account details.
- Proof of residential address.
- Copy of your ID/Passport.
- The tax office in your country of residence did not sign and stamp the RST02.
- The date stamp from the tax office is older than one year.
- Your tax affairs are not in order.
- You did not include proof that the pension and annuity income has already been taxed in the country of your residence.
FinGlobal: tax specialists for South African expats
Need to get your tax affairs in order? That’s our area of expertise. Whether you need a tax refund or tax clearance, we’re ready to take care of all of the paperwork and all of the hassle.
Contact FinGlobal today to see how we can make your expat life easier.