Expats who have chosen to go through the formal financial immigration process with SARS, on completion of the financial immigration process they are issued with a letter by the South African Revenue Service (SARS) that contains their Emigration Tax Compliance Pin (TCS). A letter which has a validity period of 1 year.
Due to the limited validity of the letter, confusion can occasionally arise when dealing with non-resident tax matters. At times the TCS Pin letter has not been sufficient and has brought into question the formal tax status of the individual.
To combat this, SARS has recently started issuing an additional letter called the Non-Resident Tax Status Confirmation Letter that confirms that the individual has ceased to be a tax resident of South Africa and effective date that their residency was ceased.
In order to apply for the Non-Resident Tax Status Confirmation Letter, the individual must have already undergone and completed the formal financial immigration process with SARS by declaring their remaining assets in South Africa and complying with all the exit tax procedures.
The additional letter will remove any further doubt that may arise regarding the tax status of the person due to the 1-year validity of the TCS Pin letter.
The responsibility is on the taxpayer to declare their tax position to SARS.
It is important to note that even if you have broken your tax residency by way of the ordinary residence test or by the physical presence test, these do not automatically change your tax status with SARS and therefore you would still be required to submit your annual tax return and declare your worldwide income to SARS.
Once you have completed the formal immigration process and are no longer considered a tax resident of South Africa, you may benefit in the following ways:
- Only being taxed on South African sourced income
- Capital gains tax shall be applicable only to fixed property located in South Africa / assets of permanent establishment
- No other capital gains tax
- No worldwide tax, even on remittances
- No donations tax and / or estate duty
It is always best to seek out specialist advice when dealing with tax-residency matters and cross-border taxation.