Sars’ Process To Declare That You Have Ceased To Be A Tax Resident In South Africa

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In terms of section 23 of the Tax Administration Act No. 28 of 2011 (“TAA”), taxpayers must inform SARS within 21 days of any changes in their registered details, which also includes their tax residency status. As South Africa operates under a residence-based tax system, failing to do so will allow SARS to tax individuals on their worldwide income and will be a contravention of the TAA.

The process of ceasing tax residency in South Africa was only recently formalised at SARS by introducing a mechanism to inform SARS of the change in tax residency.

Historically, there was no formal mechanism to inform SARS of such a change in status. SARS later introduced a checkbox on the individual’s income tax return where you could inform SARS of such a change in status and declare and pay your “exit tax” on the deemed disposal of your worldwide assets.

It was only with the introduction of the Taxation Laws Amendment Bill in March 2021 that SARS indicated that this process would be formalised, and since the commencement of the 2022 tax season, this checkbox has been disabled.

The updated communication from SARS published in July 2022 requires that ceasing tax residency from South Africa must be captured through the Registration, Amendments and Verification Form (RAV01) on e-Filing. Once the taxpayer registered details have been updated, SARS will request the relevant supporting documentation. The purpose of the documentation is to prove to SARS that you have ceased to be a resident for tax purposes.

The following is a list of the standard documents that must accompany all declarations, irrespective of the grounds on which the taxpayer ceases tax residency:

  • Copies of passports, including all entry and exit stamps;
  • Copy of visa, residency permit- or citizenship documents of foreign passport;
  • A signed declaration indicating the basis on which you qualify for tax non-residency (official declaration available to download from the SARS website);
  • A statement of personal assets and liabilities as of the day before residency cessation date, as well as an accurate valuation for each interest; and
  • A motivational letter that sets out the supporting argument for the cessation of tax residency.

Depending on which  basis the taxpayer has ceased tax residency, there might be additional documentation requests. Tax residency can be ceased on the grounds of the physical presence test, ordinary residence test or by applying the relevant Double Tax Agreement, if applicable.

The cessation of tax residency also triggers a deemed capital gains disposal event. Therefore, if the taxpayer had, or still has, assets that would trigger such a tax, they are also required to submit documentation for each asset.

Once SARS has reviewed the information and finds it in order, they will capture the declaration and pre-populate the date of cessation on future ITR12 income tax returns.

SARS, however, acknowledges that there may be taxpayers who have informed SARS of their change in tax residency under the previous disposition. They state on their Cease to be a Resident webpage that such taxpayers may request confirmation of their status and must include the following in their request:

  • 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.

Tax residency has and continues to be a contentious issue. The mere ticking of the checkbox on the income tax return did not cause a taxpayer to cease to be a tax resident. A taxpayer can only cease to be a tax resident based on the criteria of the various residency tests. However, due to the evolvement of the cessation of the residency process at SARS, taxpayers were left with more questions than answers when it came to confirmation of their tax residency status.

A taxpayer who has previously informed SARS of their cessation of tax residency is urged to follow the process mentioned above to confirm their status with SARS. Our team of expert advisors is also on hand should you require assistance with the above.

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