SARS is now officially issuing affirmation of tax non-residency letters. The letter serves as an added affirmation one’s non-tax residency, with pre-current documentation having an expiration day and not always suffice in dealing with some tax non-resident matters. Even so, this has sparked some confusion among the South Africans functioning abroad who are not certain of the distinction in between the SARS non-resident confirmation letter and the Emigration Tax Compliance (TCS) Pin.
The Big difference
The SARS Non-Resident Tax Position Affirmation Letter is a letter confirming that a single has ceased to be a tax resident of South Africa with an indicator of the successful date tax residency was ceased.
The Emigration Tax Compliance (TCS) PIN is a affirmation that one gets when efficiently going through the financial emigration (ceasing of tax residency) process with SARS. This is where by just one declares their remaining South African property and complies with the ‘exit tax’ technique to validate tax non-residency.
To be capable to utilize for the SARS Non-Resident Tax Status Affirmation Letter one particular must have previously accomplished the financial emigration (ceasing of tax residency) course of action by way of SARS. SARS will then situation the more confirmation letter confirming tax non-residency, as the TCS pin for Emigration is only valid for 1 12 months from date of difficulty.
In the end, the reason is to clear away any question or confusion arising from the 1-yr validity time period of the TCS pin.
Knowledge Tax Resident vs Tax Non-Resident
As a Tax Resident, you are lawfully required to submit tax returns to SARS just about every 12 months and declare your globally earnings (local and international) and then claim any exemptions or tax credits on the overseas earnings.
Importantly, if you do not formally be aware your self as tax non-resident with SARS, then you will be seen as a tax resident in SA. Even if you have damaged our tax residency tests, staying the ordinarily residence test and physical presence check, or there is a Double Taxation Treaty in put, these things are not likely to automatically adjust your status to tax non-resident. The only way to transform your tax position is to formally undertake the pertinent authorized procedures by means of SARS.
Just ticking a box on a tax return or currently being bodily absent from SA does not cease your tax residency in South Africa. The SA tax system works on two rules –
(a) the onus is on the taxpayer to declare their tax posture and
(b) the taxpayer then bears the onus of evidence, on a balance of chances, to offer proof of their declared tax posture.
As a tax non-resident, South Africa’s expatriate tax legislation no more time applies, and you will not be liable to pay out tax in South Africa on your foreign acquired revenue. SA tax non-people are only taxed on SA sourced revenue.
Advantages of Ceasing your Tax Residency
After ceasing your tax residency, you will start to get pleasure from the numerous advantages of currently being an SA tax non-resident, as a result the great importance of possessing all the important and right documentation.
Some of the advantages of remaining a tax non-resident are:
- You will be taxed on South African sourced earnings only
- Funds gains tax will only be applicable on fastened property found in South Africa /belongings of long-lasting institution
- No other cash gains tax
- No earth-wide tax even on remittances and
- No donations tax and / or estate responsibility.
Financial Emigration also provides the scarce chance to encash your retirement annuity in entire once you have been tax non-resident for 3 years.
If you are not sure of your present tax standing, it is essential you conduct a tax diagnostic work out to assess your place for every SARS’ records. The exercise will reveal if you appropriately ceased your tax residency in accordance to South African legislation and in the formal course of action of declaration by means of SARS. It is normally most effective to search for specialist recommend when it will come to cross-border taxation and tax residency matters, especially when complemented by legal experts.
Lovemore Ndlovu – SARS and Trade Handle Professional at Tax Consulting SA Victoria Lancefield – General Supervisor, Economical Emigration & Tax Residency at Tax Consulting SA.