Are you a South African tax resident?
As a South African living or planning to live abroad, you will need to determine whether you’re liable to carry on paying tax in South Africa once you’ve moved offshore. You are a South African tax resident if you meet one of two tests:
– The ordinarily resident test or
– The physical presence test and
– You are not considered exclusively to be a resident of another country by means of a tax treaty (Double Tax Agreement or DTA).
What is the ordinary resident test?
The ordinarily resident is a personal test that looks at, for example, where your primary home is situated, where your assets are held and where your family-life is centred. If all signs and circumstances point to South Africa, you will then be considered a South African tax resident, regardless of the number of years you’ve spent overseas.
What is the physical presence test?
The physical presence test objectively evaluates the amount of time you spend in South Africa. To be considered a tax resident according to this test, you will only need to be physically present in South Africa for:
– 91 days or more in the year of assessment and
– 91 days or more in each of the previous five years of assessment and
– 915 days in total during the five previous years of assessment
You will not be presumed to be physically present in South Africa if you do not meet these requirements, which means that you are then considered to be a non-resident for tax purposes.
What are the consequences if you are a non South African tax resident?
You can cease tax residency at SARS (South African Revenue Service).
You are liable for exit tax calculated the day before your departure from South Africa.
Only South African source income is applicable on your tax return.
Why is it important to do your tax exit from South Africa?
Once you’ve done this, you will be liable only for tax on income earned on assets that you leave behind in South Africa (for example rental income on immovable property). Employment income received in your country of residence will not be taxed by SARS (South African Revenue Service).
What’s the process to change your South African tax resident status to a non-resident?
Changing your tax residency status and determining your exit tax payable will require an application to SARS (South African Revenue Service) and each case will be evaluated based on its own merits.
Ceasing to be a South African tax resident means that you are deemed to have made disposal of all your worldwide assets, for the purpose of capital gains tax. This is no small matter. Excluding immovable property in South Africa, you are deemed to have sold all your worldwide assets on the day before you ceased to be a tax resident, which entitles SARS to impose a capital gains tax liability on you.
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