The 2023 SARS Tax Season kicked off in July. If you’re a South African living overseas you might be tempted to think that this doesn’t apply to you, but there’s a good chance you might be mistaken. Even if you’ve already completed the process of formal emigration before 2021, or tax emigration before 2022, it is possible you might still be affected by the latest tax season. What are we talking about? Becoming a non-resident for tax purposes (the outcome of having ceased your tax residency in South Africa) doesn’t mean you are automatically deregistered at the South African Revenue Service. Let’s take a look at what this might mean for South Africans now living abroad.
Do you still pay tax once you have emigrated from South Africa?
South Africa has a residence-based tax system. This means that South Africans can be taxed on their income regardless of where it is earned or where they live if they meet the requirements for tax residency. Furthermore, South Africans living abroad do not automatically become tax non-residents when they emigrate and there is the possibility that those earning abroad can still be taxed on their foreign employment income, particularly where it exceeds the R1.25 million threshold for tax exemption.
Additionally, if you have only left South Africa in the past year, you are still considered a South African tax resident and you will need to file a tax return and declare all your income, if you want to avail of the foreign income exemption of R1.25 million. You will need to remain tax compliant until you qualify to break your tax residency with South Africa.
Updates to the SARS eFiling system could mean you are at risk
If you have already tax emigrated from South Africa, it is essential to ensure that you receive a SARS Non-Resident Confirmation Letter to verify that your tax status has been updated. If you ceased tax residency before 1 January 2022 and have not received a confirmation letter from SARS, there is a chance that your application was not properly processed or that it was canceled without you being notified. This means that you could still be considered a South African tax resident.
As SARS transitions to auto-assessments consisting of prepopulated estimates and returns, using data automatically supplied by third parties, having an active tax number puts you at risk if you are not monitoring your tax affairs in South Africa. In the event that a SARS update inadvertently triggers an error on your South African tax return, and you remain unaware of the issue, there’s a possibility that SARS might reach out to the tax authority in your new home country. Subsequently, both the tax authority in your working country and SARS come after you to recover taxes from you that have been incorrectly calculated.
This unfortunate series of events would bring your tax situations to the attention of both tax offices, which can get complicated, fast. Your country of residence would likely seek an explanation for SARS’ assumptions, leading them to scrutinise your tax records. This puts you in a position where you’ll have to prove to both authorities that you aren’t liable for the taxes being claimed, assuming non-liability is even an option for you at this point. Proving non-liability to SARS isn’t the easiest task in the world, and it will be even more complicated, given that these events are usually only flagged about 12 months after the initial SARS assessments. Think of all the administrative penalties and interest charges that could rack up in that time!
How to become a tax non-resident of South Africa
To cease your tax residency, you will need to notify SARS that you no longer qualify as a tax resident. You will do this using the RAV01 form and be able to supply the requested supporting documentation to validate your tax status change. Until you have completed this process, you will still be considered a South African tax resident and liable to pay tax on your worldwide income.
After reviewing your RAV01 form and the supporting documents validating your tax residency cessation, SARS will provide official approval for your request. As a result, your forthcoming ITR12 form will be automatically filled in with the effective date of your updated tax residency status. It’s important to note that your application could be rejected under certain circumstances: if you continue to fulfill the tax residency criteria or if you are unable to furnish the required and accurate documentation as stipulated by SARS.
What happens after you’ve ceased your tax residency with SARS?
If you no longer require a South African tax number, you should deactivate it once you have received your SARS Non-Resident Confirmation Letter. This lets SARS know that you no longer have any taxable assets or income remaining in South Africa, which means you have no reason to file a tax return.
FinGlobal: tax specialists for South Africans living abroad
If you need assistance clarifying your tax status in South Africa, FinGlobal can help. We can assist you with the process of ceasing your tax residency with SARS, as well as getting your hands on a SARS Non-Resident Confirmation Letter if you never received one. We can also assist you with expat tax compliance, tax clearance and retirement annuity encashment.
To see how we can assist in making your transition to tax non resident as simple and seamless as possible, leave your contact details below and we’ll be in touch! Alternatively, you can send an email to firstname.lastname@example.org