WEBINAR | EXPAT TAX 101

TAX RESIDENCY IN THE UAE

A WEBINAR FOR SOUTH AFRICAN EXPATS

TAX RESIDENCY
IN SOUTH AFRICA

South Africans with certain skillsets are in high demand overseas, while others are eager to immerse themselves in the international job pools to gain first-world experience. Whatever the incentive, many people are considering work opportunities abroad.

This could be a lucrative decision, but job seekers seldom follow the correct procedures to ensure compliance with the South African Revenue Services (SARS), nor do they fully comprehend the implications on their personal tax. To understand why it might be better to cease your tax residency in South Africa, let’s look at what is meant by an individual’s tax residency status.

What is tax and non-tax residency?

The SA tax system is a residence-based system. In terms of the residence basis of taxation, any South African tax resident will be subject to tax on worldwide income and capital gains. Income tax is levied at progressive rates on an individual’s taxable income for the year, which is calculated by subtracting allowable deductions and exempt amounts from gross income.

Non-tax residents (non-residents) are taxable only on South African-sourced income and capital gains resulting from the disposal of immovable property in South Africa. Looking at the difference between the two statuses, it might be wise to apply for a non-tax residency. Remember to consult an emigration or taxation specialist before making this decision.

How to determine your tax residency status?

South African tax residency is determined by using two tests. The first is by way of the ordinarily resident test. Where it is conclusively determined that you are not a tax resident in terms of the ordinarily resident test, then the physical presence test is applicable.

If you are ordinarily resident, you cannot simply cease your ordinary tax residence by not being physically present in South Africa. In fact, your absence from South Africa has no bearing where your tax residence is being evaluated.
You will be regarded a tax resident of SA if you are physically present in South Africa for a period or periods exceeding:

91 Days in total during the year of assessment under consideration.

91 Days in total during each of the five years of assessment preceding the year of assessment under consideration.

915 Days in total during those five preceding years of assessment.

An individual who fails to meet any of these requirements will not satisfy the physical presence test. In addition, any individual who meets the physical presence test, but is outside SA for a continuous period of at least 330 full days, will not be regarded as a resident from the day on which they ceased to be physically present. If the individual is neither ordinarily resident, nor meets the requirements of the physical presence test, that individual will be regarded as a non-resident for tax purposes.

Do I qualify to cease my tax residency?

To cease your ordinary tax residence in South Africa, the following two requirements need to be present:

How do I cease my tax residency?

If you meet the qualifying criteria, then you may submit a declaration to SARS to change your status. However, determining or ceasing your tax residency is often not a clear-cut case. More than that, it can be a lengthy and complicated procedure. The simplest, and safest, course of action is to obtain the services of a tax or immigration specialist before deciding what route to take. A knowledgeable consultant can guide you through the pitfalls and assist with ceasing your tax residency. If your earning structure or immigration process is a bit more complex, choose a practice that houses extensive legal experience under the same umbrella.

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