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Tax refunds for South Africans living abroad: do I have to file a return as a non-resident?

Tax refunds for South Africans living abroad: do I have to file a return as a non-resident?

October 11, 2023


While no one enjoys paying tax on their hard-earned income, everyone gets a kick out of getting money back from the taxman. What are we talking about? Tax refunds from the South African Revenue Service (SARS), of course. This usually happens when a taxpayer has paid too much tax in error, or they are entitled to a tax deduction or credit, or their income bracket has changed, which resulted in them overpaying tax.

As a South African living overseas, you might be eligible for a South African tax refund from SARS, which will allow you to claim back on tax paid in South Africa. How do you know if you are due a refund from SARS? Read on…

Do you have to file a tax return with SARS if you are a non-resident?

If you have income sourced in South Africa, or revenue-generating assets remaining in South Africa, you will need to file a tax return with SARS, even if you are no longer a resident for tax purposes.

Which tax refunds could you qualify for in South Africa?

1. Tax relief in terms of a Double Taxation Agreement (DTA) with South Africa

A double tax agreement (DTA) is an international agreement between two countries that aims to eliminate double taxation on income earned in both countries. Under the provisions of a DTA, a taxpayer may be able to claim a foreign tax credit in South Africa for taxes paid on foreign income in the country where the income was earned.

How to claim a tax refund from SARS:
To claim a foreign tax credit, you must submit a completed ITR12 tax return to SARS. SARS will then process the tax return and calculate the foreign tax credit that is due, which can be used to offset tax on foreign earnings/worldwide income declared to SARS.

2. Tax on lump sum payments from retirement funds

Where lump sum payments are taxed is determined by a Double Taxation Agreement, which allocates the taxing right to either the resident country or source country. Establishing the nature and source of the lump sum is necessary to ascertain if it qualifies for a tax refund from South Africa.

How to claim a tax refund from SARS:
If a lump sum does qualify for a refund, an objection must be raised with SARS to initiate the refund process. An objection can be submitted to SARS within three years of SARS issuing the assessment.

3. Withholding tax on interest

The Income Tax Act imposes a 15% withholding tax on individuals or entities not residing in South Africa, who receive certain interest payments or royalties from the country. The South African entity making the payment is responsible for withholding and transferring this tax to SARS on behalf of the non-resident recipient.

Under certain circumstances, you might qualify for a reduced withholding tax rate but the reduced rate doesn’t automatically apply, it must be requested from SARS.

How to claim a tax refund from SARS:
A “Withholding Tax on Interest Declaration” document must be submitted by the South African entity that withheld the tax to SARS. If the reduced rate is approved, you become eligible for a refund for overpaid withholding tax. This application must be submitted by the company within three years after payment of the interest. The excess withholding tax will then be refunded to the South African entity, and paid out to the non-resident individual.

4. Tax on pension and annuity income received from South Africa

SARS charges income tax on pension and annuity income paid out in South Africa. Tax relief is available to tax non-resident individuals – which means South Africans living overseas can claim back tax from SARS. To qualify for tax relief in South Africa, (in other words, to have this income exempt from tax in SA under a DTA and avoid paying tax on it) the RST01 directive application must be submitted to the South African Revenue Services. This application must be made annually.

How to claim a tax refund from SARS:
If tax has already been paid on your South African annuity and pension income, you can claim a refund for tax paid by submitting the RST02 application, which is a request made by a tax non-resident for a refund in terms of a Double Taxation Agreement.

5. Other tax refunds

It is possible that you will qualify for a tax refund if you have spent part of, or the whole tax year overseas and have received remuneration from a South African employer.

You might also qualify for a tax refund from South Africa where you:

  • Only worked for a portion of the year
  • Worked for an employer outside of South Africa
  • Received a lump sum payment (such as a bonus or redundancy pay-out)
  • Had more than one employer over the year
  • Received interest income in South Africa
  • Have not yet filed tax returns

FinGlobal: cross-border financial specialists

Need assistance with ceasing your tax residency in South Africa? We’re ready to help with a wide range of cross-border financial transactions, making it seamless and simple for you to get South African tax refunds, tax clearance, foreign exchange, and more.

To see how we can assist you with claiming your tax refund from SARS (and more!) leave your contact details below and we’ll be in touch!

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