If you’re a South African who has relocated abroad for work, it’s important for you to be informed on the tax implications of your move to avoid any nasty tax surprises. Physically relocating abroad does not terminate your tax obligation to the South African Revenue Service (SARS). As a tax resident, you are obliged to file tax returns with SARS annually, disclosing your worldwide income (both local and foreign), and subsequently asserting any exemptions or tax credits on your foreign earnings.
So how do you protect your overseas income from SARS? Two documents is all it takes.
Who is a tax resident of South Africa and why is this important?
Even if you are living and working abroad, unless you formally declare to SARS that you have ceased to be a tax resident, the tax authority will continue to treat you as a tax resident in South Africa. This is the case even where you have broken both tax residency tests – the ordinarily resident and physical presence tests – or there is a Double Tax Agreement in place, these factors do not automatically change your status to tax non-resident. The only way to change your tax status is to complete the relevant legal processes as required by SARS.
Successful completion results in two important documents for expats: the Tax Compliance Status (TCS) PIN and the Non-Non-Resident Tax Status Confirmation Letter from SARS.
What is the Emigration Tax Compliance Status PIN (TCS)?
The TCS PIN is an official confirmation issued by SARS that a taxpayer has undergone the formal emigration process and ceased their tax residency, having declared their remaining assets and settled their exit tax liability. The TCS PIN is valid for a period of 12 months from the date of issue. The TCS PIN has replaced the Tax Clearance Certificate previously manually issued by SARS.
What is the SARS Non-Resident Tax Status Confirmation Letter?
This letter is an official acknowledgement from SARS that confirms an individual’s tax status has been changed from resident to non-resident. This letter also indicates the date on which tax residency ceased. Unlike the TCS PIN, it does not expire, and can be used until the individual becomes a tax resident again, if they so choose.
The process of ceasing tax residency with SARS
Until you have ceased tax residency with SARS officially, you will be expected to pay tax on your foreign employment income. To protect your earnings from SARS, it is necessary to complete the full SARS process, and obtain both documents in order to remain fully exempt from paying taxes on foreign earned income in South Africa.
The benefits of obtaining the TCS PIN and Non-Resident Confirmation Letter
In addition to removing your foreign income from SARS’ tax net, there are other benefits to completing the tax emigration process and obtaining these two documents.
- With the TCS PIN, you can transfer your funds overseas promptly, including the proceeds from the sale of immovable properties, shares, unit trusts, and other remaining assets.
- To facilitate such transfers, it will be necessary to have your bank account status converted to non-resident, in order to cash in any remaining policies, receive the withdrawal proceeds and transfer these abroad. Banks will only handle this conversion upon presentation of a valid Emigration TCS PIN.
- Here, you will need to provide the fund administrator with a valid TCS PIN to verify that you have completed tax emigration in order to have the proceeds paid into your non-resident account, where the withdrawal is made on the basis of emigration.
- SARS now requires the Non-Resident Tax Status Confirmation Letter in order to process tax directives in respect of policy withdrawals by non-tax residents, while policy providers have replaced the emigration policy withdrawal option with a cessation of tax residency withdrawal. Same outcome, different name.
In practice, this means that regardless of when or how an individual conducted their emigration – whether formal emigration before 2021 or tax emigration post 2021 – the SARS Non-Resident Tax Status Confirmation Letter is now a requirement to put the issue of tax residency to bed and enable an individual to successfully withdraw their remaining retirement policies. Without this letter, SARS will not process the tax directive, which means that the policy provider is unable to process the withdrawal.
- The SARS Tax Compliance Status PIN: what is it and how do I get it?
- The Tax Compliance Status PIN: everything SARS wants you to know about tax clearance
- What documents do you need to submit with your Tax Compliance Status (TCS) in respect of emigration?
FinGlobal: tax specialists for South African expats
Tax emigration is a complicated, time-consuming process, which is why you should outsource the headache. Let FinGlobal handle the paperwork, every step of the way. We’ll make sure you get your Emigration TCS PIN and Non-Resident Tax Status Confirmation Letter from SARS. Get expert assistance with your tax exit and tax clearance, as well as assistance with cashing in your retirement policies once you’ve become a non-resident.
To enquire about FinGlobal’s convenient services for South African expats, leave us your contact details and we’ll be in touch to find out how we can be of assistance.