South Africans abroad can no longer claim blanket exemption on their foreign employment income, since amendments to taxation law brought expats back into the clutches of the South African Revenue Service (SARS). As a result, South African tax residents are now liable to declare and be taxed on their worldwide and local income. This means it is now essential for those South Africans who have emigrated (or still plan to do so) to verify their tax status, so they know exactly where they stand on their annual obligation to submit a tax return to SARS.
Who needs to submit a tax return in South Africa?
All South African tax residents (and non-residents earning an income in South Africa) need to submit a SARS tax return for the purposes of declaring their income, and paying tax.
Who is considered a tax resident in South Africa?
Under the Income Tax Act of 1962, individuals are considered tax residents of South Africa if they meet at least one of the residency tests.
- First, SARS conducts an inquiry into whether the taxpayer meets the requirements of an ordinary resident based on their intention. Under this test, an individual who does not intend to leave South Africa permanently is considered a tax resident.
- If the individual fails to meet the requirements of the ordinarily resident test, they can still qualify as a tax resident based on the physically present test, which is an objective time-based inquiry.
Question: if I have already emigrated, do I still need to file a SARS tax return?
Answer 1: no tax emigration
- Yes, you will need to submit a SARS tax return if you have not yet completed your tax emigration and received a confirmation letter from SARS confirming your tax status as non-resident.
- This is because until you no longer meet the requirements of tax residency, you will still be considered a tax resident and SARS will be entitled to tax you.
- You become eligible for tax emigration when you no longer meet the requirements of the ordinarily resident and physically present tests.
Answer 2: tax emigration + South African sourced income
- Yes, you will need to submit a SARS tax return if you have completed tax emigration but you still receive an income that is sourced in South Africa.
- This is because all income sourced in South Africa is taxable in South Africa.
- This also means that a non-resident earning an income in South Africa will need to file a SARS tax return to declare this taxable income.
Answer 3: non-resident + no South African sourced income
- No, you will not need to submit a SARS tax return if you have completed tax emigration and SARS has issued you with a confirmation of non-resident status letter and you no longer receive any income from South Africa.
- If you are no longer a tax resident, you no longer fall under the authority of SARS.
- No income in South Africa means you have nothing to declare and no reason to be taxed by SARS.
What happens if you don’t submit a tax return in South Africa?
Think you can hop on a jet plane and SARS won’t be able to track you down? Think you can fly under the radar and avoid detection if you’ve already left? No such luck. Now, thanks to the internet, social media, digital banking and cross-border reporting duties between banks and revenue authorities, it is unlikely that you will go unnoticed by SARS for very long. SARS also conducts investigations into individuals when they submit a declaration to cease their tax residence, and in this respect it is important to note SARS looks at:
Whether a taxpayer earned any income after they emigrated. It must be declared, as they were still considered a tax resident up until the point that they ceased to meet the requirements of the physically present test in that they left South Africa and did not return for a full 365 days. Income in this period must have been declared, regardless of whether it was local or foreign income.
What the taxpayer’s employment status was between emigrating and ceasing tax residence. If an individual did not earn any income or was unemployed, this must be placed on record with SARS for the purposes of an auditable trail.
What happens if you do not declare income to SARS when you have a duty to do so? If you fail to declare any foreign income (even as the result of a mistake or incorrect interpretation of your tax obligations) you might be liable for outstanding tax and potential non-compliance penalties and interest on the outstanding amount. Furthermore, your tax residency status might be in jeopardy and it is possible you will not be granted a non-resident confirmation letter by SARS until all non-compliance is corrected and any outstanding tax due to SARS is paid.
How do you declare your foreign income in your SARS tax return? Take a look at this handy guide that tells you everything you need to know.
- You will need to activate or update your profile on SARS eFiling.
- You will then complete the tax return process on eFiling.
- Lastly, you will submit the supporting documents and tax return to SARS.
What documents are needed for a tax return at SARS?
- SARS will inform you of what documents they need to process your tax return. These generally include –
- IRP5 form (employee tax certificate) showing foreign income earned for the year.
- Copy of foreign employment contract
- Copies of passport showing the number of entries/exits for South Africa
- Spreadsheet showing days in/out of South Africa
Read more about South Africans abroad, filing tax returns after you’ve emigrated and ceasing tax residency with SARS.
- What you need to know about SARS tax clearance certificate
- How to claim tax back from SARS – tax refunds in SA
- Tax relief vs tax refunds – what’s the difference?
- Letter or PIN? The SARS non-resident confirmation letter and the Emigration Tax Compliance PIN
FinGlobal: tax specialists for South African expats
Clarifying your tax status with SARS is now unavoidable for current and future expats. If you’re unsure of your position with SARS or you moved abroad a number of years ago, FinGlobal can assist you with verifying or changing your tax status through tax emigration. We can also ensure that your tax obligations have been fulfilled and assist with gaining tax clearance so you can avoid nasty future tax surprises and penalties from SARS for non-compliance.
To get started on your free, no-obligation, 100% confidential SARS assessment, leave us your contact details below and we’ll be in touch.