Important changes regarding citizenship, residency, emigration and tax residency in recent years may have changed the tax returns and information that you need to submit to maintain tax compliance. More and more people are working in different parts of the world or earning income from different sources in countries they may not live in. What are the tax implications of your status as a citizen, resident, or tax resident of South Africa?

Citizenship and your taxes

A citizen, simply put, is a legally recognised national of a state. In SA, as with many countries, citizenship is granted through being born in the country, or via descent from a previous generation, or by naturalisation, usually after having lived in the country for a stipulated period.

Citizenship comes with rights like the right to vote and to live and work in that country. However, you do not need to live in SA to retain your citizenship status. South African citizenship is also not linked automatically to tax residency. For example, if your family emigrated to another country when you were a child, you may have retained your South African citizenship, but you will not be a South African taxpayer.

Your residency status

According to current tax legislation, if you leave SA to take up permanent residence in another country, you must inform the South African Revenue Service (SARS) that you have ceased to be a South African tax resident, which in turn requires a tax compliance status (TCS) certificate before you can transfer money out of the country. If you are living outside SA temporarily, you are allowed to receive pension and other annuity payments directly into your foreign bank account.

SA has a residence-based tax system, which means that your status as resident or non-resident, rather than where you earn an income physically, determines how SARS will tax you. If you’re a resident, you’re taxed on your income in South Africa regardless of where it’s earned.

Non-residents earning income in SA

If you’re a foreigner, or non-resident, earning an income or owning property in SA, you will be taxed on all income that has a South African source, and on certain capital gains. The Income Tax Act lays out various scenarios in which the source of income is considered to be located in SA that apply to non-residents, including dividends, royalties and disposal of physical assets. Salary income earned in SA by a non-resident is generally subject to normal SARS tax.

What does tax residency mean?

Essentially, being a South African tax resident means that you are subject to tax on all your income, whether local or foreign. Even if you don’t live in SA, certain factors can still see you classified as a tax resident. They include the following:

• If you are ordinarily resident
  If your ordinary residence (where you return after travelling) is in South Africa, you may be considered a tax resident regardless of how much time you spend outside the country. SARS considers several factors in an ordinary residency test, including nationality, your visa status in the foreign country where you are currently, the type of visa you are travelling on, proof of permanent residence abroad (if applicable), and whether you have South African properties, business interests, family ties and social interests.
  
  
• Physical-presence test
  Even if you don’t qualify as ordinarily resident in SA, SARS could still decide you are liable for tax according to the physical-presence test. You will be considered a South African tax resident if you spent 91 days or more in SA during the relevant year of tax assessment, if you spent 91 days or more in SA in each of the preceding 5 years of assessment, and if you spent more than 915 days in total in SA during those 5 preceding years of assessment. You need to meet all 3 of the above requirements to satisfy the physical-presence test. Tax residency status through the physical-presence test can be broken by leaving SA for more than 330 days.

Ceasing tax residency

If you feel that you are no longer a tax resident of SA, you need to inform SARS by submitting a RAV01 form on eFiling. The information you must capture on this form includes the date when you ceased to be a tax resident, so it’s a good idea to get the help of a tax expert. The application process can be quite complex, and SARS requires several supporting documents to confirm that you qualify.

Once SARS has established that you’re no longer a South African tax resident, they will no longer tax you on income earned outside SA. You’ll need to declare income from South African sources only on your SARS tax return.

Double-taxation agreement

A double-taxation agreement (DTA) is an agreement between 2 countries that is set up to avoid the same income being taxed twice – in this case, between South Africa and whatever foreign country you may be living and earning in. The agreement provides a legal framework to determine in which country you qualify as a tax resident. If you are deemed a South African tax resident, you may not be taxed again on the same income in the country in which you reside.

If you apply to cease to be a South African tax resident based on a DTA, you will need to prove this to SARS. Submit a tax residence certificate from the foreign revenue authority or a letter from them confirming that you are regarded as a tax resident of that country.

Tax compliance and exchange control

Tax and exchange control go hand in hand in South African law. If you’re a tax resident, you’re entitled to transfer up to R1 million abroad in a calendar year without needing preapproval. If you’re a non-resident, however, you need preapproval for every cent that you transfer out of the country in a calendar year. This is done using a form called Approval for International Transfer.

Many of these tax residence processes can be complicated to navigate, and you need to submit the correct documents through the right channels if you want changes in your tax status to be handled smoothly. You might find it safer and easier to rely on expert tax advice from a financial adviser.