When individuals in South Africa become non-residents, they are not automatically exempt from submitting a tax return with the South African Revenue Service (SARS). This process is crucial to ensure that non-residents comply with their tax obligations, even if they no longer reside in the country. Here’s a detailed guide on this topic.

Tax Residency and Non-Residency in South Africa

In South Africa, your tax status is determined by whether you are classified as a tax resident or a non-resident. Tax residency is based on physical presence and intention to reside. Non-residency is typically established when an individual emigrates, changes domicile, or no longer meets the criteria for tax residency under the physical presence test.

  1. Physical Presence Test: You are considered a tax resident if you spend more than 91 days in South Africa during the current tax year and for each of the preceding five tax years. Additionally, over a total of five years, if you spend more than 915 days in the country, you would be classified as a tax resident unless other exceptions apply.
  2. Non-Resident Status: Once you meet the criteria for non-residency, you no longer pay tax on worldwide income. However, non-residents are still subject to tax on South African-sourced income, including investments, rental income from property, and any profits or dividends earned within South Africa.

Tax Obligations as a Non-Resident

Becoming a non-resident for tax purposes does not automatically exempt you from submitting a tax return to SARS. Non-residents may still be required to submit tax returns if they earn income from South African sources, such as:

  • Rental income: If you own property in South Africa and earn rental income from it, you must declare this income on your tax return.
  • Dividends and interest: Even as a non-resident, dividends and interest from South African investments may be subject to withholding tax, and in some cases, a tax return may still be required to ensure proper accounting.
  • Capital gains tax (CGT): If you dispose of assets, such as property, while a non-resident, CGT may apply to the profit made from the sale of South African immovable property.
  • Other income: This could include consulting fees or any other income derived from a South African source.

Filing a Tax Return as a Non-Resident

Even after you’ve become a non-resident, SARS requires you to file a tax return under certain conditions, such as:

  • When you earn South African-sourced income: You must declare any income earned in South Africa. This includes interest, dividends, rental income, or other income types.
  • When you have capital gains from South African assets: If you sell property or other taxable assets in South Africa, capital gains tax may apply, requiring a tax return to report the disposal.
  • Rebates or deductions: There might be deductions or rebates available that could reduce your tax liability.

You may be exempt from filing a return only if you no longer have any taxable income from South African sources or no other reason to interact with SARS.

Double Tax Agreements (DTA)

South Africa has Double Tax Agreements (DTAs) with many countries to avoid double taxation. These treaties outline which country has the taxing rights for various types of income. DTAs can provide relief in cases where income is subject to tax in both countries. Non-residents can benefit from reduced tax rates or exemptions on certain income types if a DTA is in place between South Africa and their new country of residence.

Consequences of Non-Compliance

Failing to submit a tax return as required by SARS can lead to penalties and interest. SARS is becoming increasingly sophisticated in tracking global movements of individuals and the sources of their income, particularly through international agreements and data-sharing networks.

Becoming a non-resident does not absolve you of all tax obligations in South Africa. It’s essential to understand when you are still required to submit a tax return, particularly if you continue to earn income from South African sources. Consulting with a tax professional can help ensure compliance and take advantage of any tax treaties or exemptions available under the DTA framework.