Saffers overseas want to substantiate their non-resident tax standing with Sars

William Louw, Sable Worldwide SA tax director, says he’s seldom seen such a flood of South Africans trying to to migrate.

“I’m booked stable for weeks,” he says. “The explanations folks wish to go away fluctuate, however on the backside of all of it they need a Plan B. They see the nation deteriorating, and consider it would worsen, and they’re involved about security, schooling for his or her children, and for some it’s simply that there are higher alternatives overseas.”

Emigration is a large resolution with severe monetary implications. Residing overseas has a significant affect on how a lot tax you pay and to which nation that tax is paid. Your tax residency standing determines how you’re taxed in a selected nation.

South Africans who’ve left the nation should now acquire a letter from the South African Income Service (Sars) to substantiate their tax non-residency standing, which is simply issued to these completely leaving the nation.

To use for the letter, you could full the tax emigration course of by means of Sars.

These dwelling overseas with out this letter might discover themselves obliged to report their international earnings yearly to Sars.

This additionally creates issues for these dwelling overseas and drawing dwelling annuities from a South African fund.

“Lots of people left within the Nineteen Nineties and are nicely previous retirement age, but now not have SA passports. The Sars eFiling system is linked to the ID doc that Sars has on file, which can now not be legitimate. We’re having to help a number of purchasers to regularise their standing,” says Louw.

Understanding tax residency

Whether or not you reside in South Africa or overseas, you can be topic to revenue tax.

There are two considerations: the place do you pay taxes and the way do you keep away from paying a couple of tax on the identical revenue?

Should you reside in SA, you’ll most certainly be thought-about a resident right here for tax functions (although there are some uncommon exceptions). South African tax residents should pay Sars taxes on their revenue earned in South Africa together with overseas revenue, in cases the place that revenue exceeds a specific amount.

Leaving South Africa doesn’t mechanically classify you as a non-tax resident. In case you are a tax resident dwelling abroad, you might be taxed on overseas revenue that exceeds the R1.25 million threshold. You might be affected by double taxation as nicely, warns Louw.

Nonetheless, the method of changing into a non-tax resident in South Africa isn’t computerized. The one technique to change your tax standing is to formally endure the related authorized processes by means of Sars.

Understanding double taxation agreements

Tax returns are all the time to be filed within the nation the place you aren’t a tax resident first. It’s potential that, in sure cases, a selected quantity could also be taxed twice since tax methods differ from nation to nation. Double taxation can nonetheless be alleviated by means of numerous Double Taxation Agreements (DTAs). By disclosing the tax which you’ll pay within the nation that you’re tax resident in, you’ll be able to often keep away from double taxation.

That is the place recommendation from an expert tax practitioner accustomed to worldwide tax is essential.

Advantages of ceasing your South African tax residency

The advantages of tax non-residency:

  • You’ll solely be taxed on revenue sourced from South Africa (except the DTA overrides the traditional legal guidelines).
  • Solely mounted property situated in South Africa and property of everlasting institutions might be topic to capital features tax.
  • Worldwide remittances are exempt from taxation. That is because of the tax being payable when the revenue is earned or the property offered, not when money strikes.

Significance of getting a Sars non-residency tax letter

In case you are tax resident in South Africa, you’re legally required to submit tax returns to Sars yearly. You should declare your worldwide earnings, each native and overseas, after which declare any exemptions or tax credit on overseas earnings. If you don’t formally notice your self as a tax non-resident, Sars will mechanically classify you as a tax resident in South Africa.

The non-residency tax letter is necessary for 3 causes:

  1. The letter is the one technique to verify that Sars has agreed that your tax standing has modified.
  2. An emigration tax clearance is now required to get funds paid overseas if withdrawing out of your retirement funds previous to retirement.
  3. A non-residency tax letter is used when a non-tax resident must take an annuity or salaried revenue out of South Africa to switch overseas for the banks. In October 2021, laws modified for non-tax residents intending to say a dwelling annuity whereas dwelling overseas. To switch funds from South Africa to an abroad checking account, an software for a very good standing tax clearance certificates should now be made. Beforehand, all you needed to do was present that you just had financially emigrated and the fund might make an offshore cost. Now, the method of accessing your dwelling annuity offshore has turn into extra difficult, notably for aged non-tax residents and people who have been in another country for greater than 10 years. (See: The right way to entry your SA dwelling annuity offshore – an eFiling information).

Louw notes that after you’re deemed a non-tax resident by Sars, the Reserve Financial institution now not lets you use your Single Discretionary Allowance to switch funds out of SA. It’s a must to show you’ve a non-residence letter from Sars or use your International Funding Allowance (FIA).

“You will need to take the required steps, understanding that Sars doesn’t mechanically challenge the letter of tax non-residency (as they promised they’d),” says Louw.

“Know your tax standing and act accordingly so that you’re not negatively affected.”

Sable Worldwide supplies complete tax providers and recommendation for South Africans at house and overseas and anybody with South African revenue. It may be reached at or by telephone at +27 (0) 21 657 1517.

Delivered to you by Sable Worldwide.

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