A step-by-step guide to ceasing tax residency and becoming a non-resident for tax purposes in South Africa

The South African Revenue Service (SARS) rules over a tax domain that is residence-based. This means that all tax residents are expected to pay tax on their income, whether it was earned locally or abroad, while non-residents are expected to pay tax only on income sourced within South Africa. Tax residence in South Africa is not linked to your citizenship or your place of residence, however, which means that you can live overseas and still qualify as a South African tax resident. If this is the case, you have a tax obligation to SARS to pay tax on all your income. The only way to terminate your tax obligation to SARS is to cease to be a tax resident of South Africa, and have your tax status officially changed to non-resident by means of tax emigration.

Tax residence in South Africa: the facts

You are a South African tax resident by default. If you move overseas, until you have officially ceased your tax residency with SARS you will be considered a South African tax resident abroad. This means you are still expected to file a tax return and declare all of your income to SARS. Even if you emigrated some time ago, and you completed the process of formal emigration through the South African Reserve Bank, there is a chance you could still be considered a tax resident.

With this in mind, it is important for South Africans living abroad (or still planning their emigration) to clarify their tax residence status in South Africa in order to avoid facing the full wrath of SARS for non-compliance.

Who is a South African tax resident?

While a South African tax resident is an individual who ticks all the boxes in terms of either the ordinarily resident or physical presence tests, simply failing to meet the requirements of these tests does not automatically change your status to non-resident in South Africa, for tax purposes. This is an administrative process (known as tax emigration) that you will have to undertake by approaching the tax authority. The outcome of this process will be ceasing your tax residency and becoming a tax non-resident.

How to cease tax residency in South Africa: step by step

Step 1: Ensure that you no longer meet the requirements of the SARS tax residency tests.

• These tests are the ordinarily resident and physical presence tests. Determining whether an individual is no longer a tax resident in South Africa depends on their previous tax residency status. If you were ordinarily resident, this involves verifying whether your intention to stop being a tax resident is confirmed by surrounding objective factors.
• If you have already ceased being an ordinary resident, this starts from the day you left the country. It is worth noting that the physical presence test is broken once you have been outside of the Republic for more than 330 days, so you cannot complete the process of tax emigration before this.
• You can also cease to be a tax resident of South Africa by virtue of a Double Tax Agreement, in terms of which you become a tax resident in another country.

Step 2: Notify SARS of the change in your details to get the tax emigration process started

As a taxpayer, you have a duty to notify SARS if any of your important details have changed. Tax residency status is one of the most important changes, so you’ll have to inform the tax authority. You will do this using the RAV01 form on eFiling, and noting the date on which you ceased to be a tax resident under the section that deals with Income Tax Liability Details.

• Once you submit this form, it triggers an investigation on the SARS system, opening your tax emigration case.
• You will then receive a request from SARS to submit the documentation that supports your assertion that you no longer meet the requirements of tax residency.

Step 3: Submit your SARS Cease to be a Resident Declaration along with supporting documentation on eFiling.

What are the standard documentation requirements for tax emigration?

1. A completed Declaration Form that asserts the basis on which you qualify as a non-resident.
2. A letter of motivation from you detailing the facts and circumstances that show you have no intention of being a tax resident in South Africa.
3. A copy of your passport/travel diary that verifies the date on which you physically exited the country.

What additional paperwork is required when completing tax emigration?

This depends on the grounds on which you are claiming to qualify as a non-resident for tax purposes.

Qualifying ground 1: Ceased to be ordinarily resident

1. 1. Proof of the type of visa used in the foreign country.
   2. Evidence of permanent residence in the foreign country, if applicable.
   3. Certificate of tax residence or a letter from the foreign revenue authority, confirming your tax residency in that country (if available).
   4. Details of any property remaining in South Africa, along with its purpose/use.
   5. Information about any business interests (e.g., investments, employment) you may still have in South Africa.
   6. Details of your family members in South Africa and the reason they remained.
   7. Information about social interests (e.g., gym memberships, recreational clubs, church affiliations) and the location of your personal belongings
   8. Details of any return visits to South Africa, including the frequency and reasons for such visits.

Qualifying ground 2: Ceased by way of the physical presence test

1. 1. Only the standard requirements need to be provided.

Qualifying ground 3: Ceased by means of application of Double Tax Agreement (DTA)

1. 1. Standard requirements to be provided.
   2. A certificate of tax residence or letter from the foreign revenue authority that verifies your tax resident status in your new country.

Step 4: File your final tax return and handle your Capital Gains Tax liability

Once your RAV01 form and accompanying documents that confirm your cessation of tax residency have been investigated, SARS will endorse your request if all is in order.
Your next ITR12 will be auto-populated with the date on which your South African tax residence status changed.

• It is important to be aware of the fact that ceasing your tax residency in South Africa triggers a capital gains tax liability in certain circumstances.
• You will need to submit your final tax return along with your Statement of Assets and Liabilities so that your capital gains tax liability can be assessed.
• Once this is handled, you request your Tax Compliance Status here, after which you will be issued a TCS PIN.

Step 5: Obtain a Non-Resident Confirmation Letter from SARS

Your tax emigration is not complete until you have received proof from SARS. This comes in the form of a Non-Resident Confirmation Letter from SARS.

If you have already completed tax emigration before 2023, you will need to request confirmation of this status manually from SARS. You can do this by submitting a letter that contains the context of your request, the basis on which you ceased residency as well as the date and manner in which SARS was previously informed of such change.

Are there any benefits to ceasing tax residency and obtaining the SARS Non-Resident Confirmation Letter?

• Your worldwide income will be safe from SARS, and you will no longer have to submit a tax return in South Africa if you have no further assets or income remaining.
• If you need to transfer your money abroad post emigration, you can only do so by means of the Approval – International Transfer application. One of the paperwork requirements for this SARS process is this letter that confirms your non-resident status.
• Furthermore, SARS now also requires this confirmation letter to process tax directives related to retirement annuity policy withdrawals by non-tax residents. This letter is also required now by the fund administrators themselves.

When will a Declaration – Cease to be Tax Resident be declined?

A declaration will be declined if you do not meet the criteria to cease your tax residency, or you do not provide SARS with the supporting documentation or any additional information they have requested.

FinGlobal: tax emigration specialists for South Africans

Ceasing your tax residency with SARS is a complicated process that’s heavy on paperwork. This is where it makes sense to outsource the administrative headache to the professionals. We’ll handle every step of tax emigration for you, and walk you through all the various requirements of changing your status to non-resident for tax purposes, and obtaining your Non-Resident Confirmation Letter from SARS. We can even assist with cashing in your retirement annuities, making the whole process as stress-free and seamless as possible.

To see how much easier we can make the tax transition for you, leave your contact details in the form below and we’ll be in touch to discuss your next steps.