From 1 March 2001, South Africa moved from a source-based to a residence-based tax system for individuals. This meant that tax residents would be subject to tax on worldwide income (excluding certain exemptions or exclusions) and non-residents would be subject to tax on income from a source within South Africa. For more information on the tax treatment of non-residents in South Africa, please refer to the Non-Residents webpage.
A tax resident may also due to a matter of choice or circumstances cease to be a tax resident of South Africa. Such change in tax residency status must be declared to SARS as there may be consequential tax implications.
Who is a tax resident?
An individual is a resident for tax purposes in South Africa either by way of ordinarily residence or by way of physical presence. The concept of “ordinarily residence” is not clearly defined and the determination of whether or not an individual is an ordinarily resident for tax purposes must be done on a case-by-case basis. A number of factors must be taken into account to make such a determination. Interpretation Note 3 (Issue 2): Resident: Definition in relation to a natural person – ordinarily resident sets out the list of factors that will be taken into account to determine whether an individual is ordinarily resident for tax purposes in South Africa.
An individual can also become a tax resident by way of physical presence. For more details in this regard, refer to Interpretation Note 4 (Issue 5): Resident: Definition in relation to a natural person – physical presence test .
An individual who is deemed to be exclusively a resident of another country for purposes of a double tax agreement is excluded from the definition of “resident”. It follows that while an individual may qualify as a resident under the ordinarily resident or physical presence tests, that individual will not be regarded as a resident for South African tax purposes if that person is a resident of another country when applying a double tax agreement.
How do I cease to be a tax resident in South Africa?
The determination of whether an individual ceases to be a tax resident in South Africa is based on the manner in which such individual has been a tax resident in South Africa. If the taxpayer has been an ordinarily tax resident, it is a factual enquiry on whether or not that person’s subjective intention to cease to be ordinarily resident in South Africa and no longer make South Africa his or her real home, is supported by various objective factors. If a person has ceased to be an ordinarily tax resident, it will be from the day such person ceased his or her residence.
Factors that will be taken into account to determine whether a taxpayer has ceased to be a tax resident of South Africa:
- The type of visa on which you have gone to the foreign country.
- Proof of permanent residence in the foreign country (if applicable).
- A certificate of tax residence from the foreign revenue authority or a letter from the authority that indicates that you are regarded as a tax resident in that country (if available).
- Details of any property that you may still have available in South Africa.
- Details of any business interest (e.g. investment and employment) that you may still have in South Africa.
- Details of your family (e.g. whether any family members are in South Africa and the reason thereof).
- Details of your social interests (e.g. gym contract, recreational clubs and societies) and location of your personal belongings.
- Details of any return visits to South Africa, the frequency thereof and the reason for undertaking such visits.
An individual, who is resident by virtue of the physical presence test, ceases to be a resident when that person is physically outside the Republic for a continuous period of at least 330 full days. The individual will be deemed to have ceased to be a resident from the day such person left South Africa.
An individual who has become a tax resident of another country through the application and for purposes of the application of a double tax agreement will also cease to be a resident for tax purposes in South Africa.
What are the consequences if I have ceased to be a tax resident?
A deemed disposal for capital gains tax purposes takes place at the time when an individual breaks his or her tax residence. The individual will be deemed to have disposed of his or her worldwide assets, excluding immovable property situated in South Africa.
Once a person has ceased to be a tax resident in South Africa, such person is no longer taxed in South Africa on his or her worldwide income, but only on South African sourced income.
How do I declare to SARS that I have ceased to be a tax resident in South Africa?
The taxpayer must inform SARS by way of one of the following two channels:
- If a taxpayer ceased to be a tax resident of South Africa during the current year of assessment, the taxpayer can inform SARS through the wizard on the income tax return (ITR12) and the date on which the taxpayer ceased to be a tax resident must be provided.
- Alternatively, the taxpayer can inform SARS by submitting the Declaration of Cease to be a Tax Resident to Contact Us.
What is the purpose of such declaration?
The purpose of the declaration is to inform SARS of the change in tax residency that will impact the basis on which you will be subject to tax in South Africa and how your returns will be assessed going forward. The year in which you have ceased to be a tax resident may also result in a possible deemed capital gains tax disposal depending on the type of assets you held and where they are located at the time.
When must a declaration be made?
When an individual ceases to be a tax resident, SARS must be informed.
Who must make such declaration?
The individual taxpayer must make such declaration to SARS or his or her duly authorised representative who must inform SARS.
What documentation should be provided?
If the declaration is made on the income tax return (ITR12), you will receive a request for supporting documents to substantiate the declaration you have made. The relevant information that must be supplied to SARS will depend on the basis on which you have ceased to be a tax resident.
If the declaration is made via email (Contact Us), the Declaration form must be completed and be submitted with the relevant supporting documentation.
Standard requirements (To be submitted with all declarations)
- The signed declaration indicating the basis on which you qualify.
- A letter of motivation setting out the facts and circumstances in detail to support the disclosure that you have ceased to be a tax resident.
- A copy of your passport/travel diary.
Specific requirements
In addition to the aforementioned information, also supply the following as applicable, depending on the basis you have ceased to be a tax resident in South Africa:
Qualifying basis 1: Cease to be ordinarily resident
- The type of visa on which you have gone to the foreign country.
- Where you have already taken up permanent residence in the foreign country, submit proof thereof.
- A certificate of tax residence from the foreign revenue authority or a letter from the authority that indicates that you are regarded as a tax resident in that country (if available).
- Details of any property that you may still have available in South Africa (Indicate the purpose that such property is being used for).
- Details of any business interest (e.g. investment and employment) that you may still have in South Africa.
- Details of your family. Indicate whether any family members are in South Africa and the reason thereof.
- Details of your social interests (e.g. gym contract, recreational clubs and societies) and location of your personal belongings.
- Details of any return visits to South Africa, the frequency thereof and the reason for undertaking such visits.
Qualifying basis 2: Cease by way of the physical presence test
- Only the standard requirements must be supplied
Qualifying basis 3: Cease due to application of Double Tax Agreement (DTA)
- A certificate of tax residence from the foreign revenue authority or a letter from the authority that indicates your status as a tax resident in that country.
When will a declaration be declined?
A declaration will be declined if one of the following conditions apply:
- If the taxpayer does not meet the criteria for ceased to be tax resident.
- If the taxpayer cannot provide us with the relevant materials or the correct relevant materials as requested.
If you previously declared that you ceased to be a tax resident, how do you request for confirmation?
If you previously informed SARS that you have ceased to be a tax resident of South Africa, and would like to request confirmation of your status, you can submit your request by way of a letter to Contact Us.
The letter should contain the:
- background to the request;
- basis on which you have ceased to be a tax resident; and
- date and manner in which SARS has previously been informed.