SARS’ new procedure for breaking South African tax residency
Estimated reading time: 4 minutes
Up till very recently the primary method of informing SARS that a taxpayer has broken South African tax residency was by marking the date of cessation on the relevant annual tax return (a taxpayer or their representative could set up a meeting at a SARS branch to inform SARS). SARS has now introduced a new declaration form which can be used to inform them that a taxpayer has broken South African tax residency.
This form is not a replacement of using the traditional method of marking the cessation of residency on the tax return; it is an alternative. A taxpayer thus has the option to either inform SARS with the new declaration form or to mark it on the tax return. If the declaration form is used, the taxpayer or their representative, will need to email the form with supporting documents to the relevant SARS email address. There is no difference in the outcome no matter the method used.
While it may seem pointless to use the new declaration form; there are some circumstances where it needs to be used and some circumstances where it can be advantageous to use the form. These are set out as follows:
- If the taxpayer broke tax residency before the option to inform SARS was available on the ITR12 and they now want to inform SARS that they have broken their tax residency, the declaration form can be used to provide an added level of certainty;
- If the taxpayer does not have an Efiling profile (as they left South Africa prior to Efiling being established) the declaration form can be used instead of the taxpayer having to set up a new Efiling profile;
- If the taxpayer wants formal confirmation from SARS that they have broken their South African tax residency. Currently, the only confirmation that a taxpayer is able to obtain from SARS that a taxpayer has broken his or her tax residency is to take a screenshot of the RAV01 (from Efiling) form that contains the taxpayer’s tax residency status. If the taxpayer has marked that they have broken their tax residency on their tax return, the RAV01 should reflect the taxpayer as a non-resident taxpayer. Formal confirmation of tax residency status from SARS can be very useful for a taxpayer, especially if they are concerned about SARS trying to tax them on worldwide employment income earned over R1.25 million in the event of being tax resident (though any residence declaration to SARS can be subject to challenge); or
- As a taxpayer’s representative you do not have access to that person’s Efiling profile but are assisting them with breaking their South African tax residency.
As can be seen, the new declaration form that can be used to inform SARS that a taxpayer has broken South African tax residency can be a very useful tool, even for employers. If a taxpayer’s employer needs formal confirmation from SARS that an employee has broken tax residency to mark them as a non-resident on payroll and thus not withhold PAYE (under certain circumstances), this new declaration form can also be used by the employer.
As part of this process SARS are requesting the following supporting documentation with such an application –
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.
Given that the process is new it remains to be seen the extent to which SARS will audit such documents or the extent of disallowance of the declaration. As such, professional support should be sought in advance of any such approach to SARS so the criteria for cessation of residence can be examined and assistance provided in the validation of supporting documentation.
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