SARS has said it is increasing tax collection for South African expats, which has created a lot of fear and uncertainty in the expat community.
Rest assured, you will only fall into the South African tax net in very specific circumstances. If you are wondering if this applies to you, this article should help clarify your situation.
Do you have to file a tax return in South Africa?
Many South African expats don’t realize that you can leave the country and even change your nationality and still have to file a tax return with the South African Revenue Service (SARS).
South Africa’s residency-based tax system means that if SARS determines that you are a tax resident in South Africa, you pay worldwide income tax.
You can be considered a tax resident if:
- You spend a lot of time in South Africa each year (around three months), or
- If your belongings and your family are mainly located in South Africa.
See also: Know your tax residency status in South Africa
If you are not a tax resident in South Africa, you may still need to file a tax return if you are earning South African source income.
What income is considered to be of South African origin?
Whether an income stream is considered to originate from South Africa is usually decided by where the asset that generates the income is based. For example, if you rent a fixed property in South Africa, that income would come from South Africa.
If you live in South Africa, but work for a UK or US company, you generate income in South Africa and therefore the income is considered to be of South African origin.
However, if you work for a South African company, but play your role overseas, that income does not come from South Africa because the person generating the income is not in South Africa.
If I am still a tax resident in South Africa but pay taxes in another country, do I still owe SARS taxes?
Double taxation is possible, but it is rare because:
- Many countries have Double Taxation Agreements (DTAs) with South Africa that define who pays tax where to make sure you don’t have to pay tax twice. You will usually only pay tax in the country that has âfirst tax rightsâ. Sometimes if the second country has a higher tax rate, you may have to pay a balance in the second country, but you will not have to pay the full amount in both countries if a CDI is in place.
- If you have spent more than 183 days outside South Africa in a 12 month period (with at least 60 of those consecutive days), the first 1.25 million Rand earned in foreign income is exempt. South African tax.
However, if you are considered a tax resident, you still have to file a tax return, even if you don’t owe SARS anything.
What is fiscal emigration?
When you no longer live in South Africa and do not have significant South African ties, it means that you would like to avoid having to file taxes with SARS. You can change your tax status by emigrating for tax purposes.
Tax emigration must be declared in the income tax return covering the year of your departure from South Africa. If you didn’t declare it when you left, you can backdate your tax emigration (however, you may have to pay capital gains tax when you do).
If you don’t have an active South African tax number, you don’t need to immigrate for tax purposes. However, you should keep confirmation that you do not have an active tax number and if possible obtain a certificate of tax residency from your new country.
See also: Are you emigrating from South Africa? Stay on the safe side of SARS with this guide to tax emigration
How do I know if my South African tax number is active?
In general, if you have been outside South Africa for more than 10 years, your tax number will have become inactive.
In this case, it’s a good idea to keep proof of tax residency in your new country in case SARS does occur, but no immediate action is required.
One thing to know is that when you leave South Africa you have to pay Capital Gains Tax (CGT) on your assets (excluding South African fixed real estate). If you haven’t, SARS might ask you to pay retroactively based on your current assets. So it is also a good idea to keep track of your asset base when you leave, as this could serve as proof that you did not have any qualifying assets or therefore owe less CGT than that. that you would be based on your current assets. based.
If you haven’t left yet, you can significantly simplify the cost base of your assets by selling your assets to you to make reporting easier and show you have a new cost base of assets in the new country of residence. For example, sell your stocks and buy them back a moment later. A cross-border wealth advisor can assist you in this process.
Still not sure? Follow this handy flowchart
If you have any questions, please contact our SA Tax team. We can help you figure out where you stand with SARS and get into compliance. Contact us on +27 (0) 21 657 1517 or to [email protected].
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