SARS income tax return

[timothy]

I just want to know when, if ever, I can stop submitting tax returns to SARS. Or do I need to do this each year forever more?

 

So a few details on my situation.

I received my PR visa in 2012 and moved to Australia in 2015.

I have no assets and no RA's in South Africa, just a single bank account with about R2000 in. (Should I close this bank account??)

I'm at the final stages of getting Australian citizenship (citizenship test is in 2 months)

 

After hearing about new tax laws in SA where you might have to pay double tax if you earn more than a million rand overseas I am concerned about whether I need to financially immigrate? My pay is already more.

 

Does getting Australian citizenship and letting go of South African citizenship have any effect on SARS tax returns?

 

I'm really annoyed about doing eFiling each year and wish I can just forget about SA now that I have started a new life.

 

What are my different options and what are the pro's and cons? 

 

Very much appreciated!

tim

 

[LM17]

Hi Tim, I am not a registered tax agent (so dont take this as formal advice)

 

1. Many consultants have been using scare tactics and the threat of double taxation to get you to Financially immigrate (and get them fees) – you won’t get double taxed if you permanently reside in AUS (As you do) you will be taxed here.

The loophole SARS is trying to close is where South Africans leave their family and home in South Africa, but they work in Kuwait, Dubai, etc and exploit the 180day rule (ie they are out of SA  for 180+ days so they don’t pay tax in SA, but they don’t pay tax in the Dubai either…anyway.

2. Your citizenship has no impact
3. If you decide to Financially immigrate you won’t have to do SA tax returns anymore. (assuming you have no income in SA and are not in SA longer than 180 days, or have a "base" there )
4. You can do it yourself (I did mine a while ago) or you can get a SA or Aus based based firm to help you – go for a fixed fee one (aprox R20k+)

 

I am sure someone (that does this full time)  will get some more detailed advise on this forum – good luck

Edited July 15, 2019 by LM17

[dme]

In the scenario above, would you still have to declare your income that you earned in Australia on your South African tax return? Or does income refer to only what you earned in South Africa which would be 0? I assumed that if you didn't spend a day in South Africa in the last couple of years you didn't have to complete a return for SARS... is this wrong?

[Nev]

Not a tax agent, this is just my understanding after talking to a tax advocate in south africa

 

When you fill in a tax return you need to declare all income, that is also the case when filling in your AU tax

 

You pay tax in the location you are a tax resident of, so for example you pay tax in Australia on your south african income as well, before all of this new stuff if you lived in Australia you only paid tax in Australia on everything

 

The stress everyone is having is that south africa is moving to a model where if you can be shown to still be a resident of south africa you will still pay tax in South Africa (This is similar to what the USA does to their citizens), you wont pay double tax, just the extra, so if you earn 25% tax in Australia, and have paid it in Australia, but for the equivalent converted salary would pay 40% tax in South africa, you owe the ANC 15% of your total pre tax income

 

You have a few options:

1) Have no assets / house / car / stuff in south africa, dont regularly transfer money back, dont pay bills there, no financial stuff like pensions, close bank accounts etc... (You are clearly not a resident anymore)

2) Financial immigrate, which makes it official however basically accomplishes what you have in 1 above

3) Cancel your citizenship in RSA if you have citizenship here (Most cost effective option)

 

Edited July 16, 2019 by Nev

[LM17]

FYI

 

from SARS:     South Africa has a residence-based tax system, which means residents are, subject to certain exclusions, taxed on their worldwide income, irrespective of where their income was earned. By contrast, non-residents are taxed on their income from a South African source. Since tax systems differ from country to country, there is a chance that a particular amount could be taxed twice. This possibility of double taxation is, however, often alleviated by tax relief contained in various Double Taxation Agreements (DTAs). These DTAs are international agreements contracted between countries to deal with potential competing taxing rights against the income of the same taxpayer. Under the provisions of the DTA, the non-resident’s remuneration earned in South Africa may not be subject to normal tax in South Africa where specific requirements are met

 

https://www.sars.gov.za/ClientSegments/Individuals/Tax-Stages/Tax-and-Non-Residents/Pages/default.aspx

 

[timothy]

Thanks guys for some useful information, but back to my original question.

 

Do I still need to submit SARS income tax returns each year?

 

@LM17 thanks for clarifying the reasons behind the new laws. It makes sense. Your nr.2 around citizenship, does not make sense. Can you elaborate what you mean by this?

 

@Nev your options makes sense, and I fall into option 1. Can you explain a bit more on your option 3? About canceling citizenship. Would that relieve me from my responsibility to file annual tax returns to SARS?  or is option 1 good enough to stop filing every year?

 

Looking forward to hear from you all!

 

Tim

 

 

 

[SandraDee]

Any source based income (income from South Africa) must be declared in South Africa. As you have a bank account in South Africa- I assume a normal account not a blocked one- then you will have to do South African tax returns -even if nil.  

 

You are probably not resident for tax purposes so none of the new laws will affect you but as you still have a South African Source based income (bank account so therefore possible interest) you will need to do returns. On this form you will reflect your non residency status.

To stop doing tax returns -cancel your bank account (no source based income) and notify sars that you are no longer tax resident.( As you are non tax resident (do not meet any of the residency tests) then you do not need to delcare your aussie income on your south african tax return - just your interest on your rsa bank account)

 

There are 3 things to consider

1. tax residency  - as above unless you consider RSA your home, travel back frequently and meet the residency  test

2. Financial residency- this is in the eyes of SARB - and is what people talk about when needing to get their R.A'S out . Most people are considered Financial residents unless they financially emigrate. Most people are considered temporarily abroad in SARB'S eyes . This doesnt have anything to do with SARS or your tax residency.

3. Citizenship - This is lost if you do not apply to keep it when applying for dual citizenship

 

YOU DO NOT NEED TO FINANCIALLY EMIGRATE TO AVOID THE NEW TAX LAW. YOU JUST NEED TO BE NON RESIDENT FOR TAX PURPOSES.

[timothy]

@SandraDee thank you for the super helpful information. I'm closing my bank account next week. So let's say it is closed now, then what is the next step? How do I notify SARS that I'm no longer tax resident? Is there a specific form for this, online through eFiling?

Your 3rd point about citizenship, will I automatically lose it when I receive citizenship from Australia? How will SA even know? 

And if I lose citizenship, does that also mean I don't need to do tax returns for SARS?

 

thank you!!

Tim

 

[LM17]

HI Tim, @SandraDee pretty much explained it - citizenship is not relevant in tax law - it depends on your tax residency and if you earn SA sourced income.

 

[SandraDee]

Hi Tim,

 

You are already non tax resident so once you have closed your bank account you will need to do your last tax return for this financial year. feb20(use your foreign address)Then you can request to be deregistered from sars - I think this is done on their website. Then you no longer need to do any more returns.  As you are already non resident for tax purposes there is no worry with the new foreign income law.

 

Citizenship and tax returns aren't linked in any way.

[timothy]

Great! Makes sense. Thank you!

[Nev]

Sorry been missing these updates,

 

So if you are not a citizen of south africa and you have no assets therethey have no option to charge you, you also no longer need to file tax returns.

 

Yes if you did not apply to retain your south african citizenship when you got your australian you will have lost your South African citizenship, however that is not enough as if you ever travel there you may run into trouble as australai does not let south africa know so they will assume you are still south african until you prove otherwise,

 

Basically you need to revoke your south african citizenship formally, after that they can kiss your .........

[XXXXX]

1 hour ago, Nev said:

 

 

Basically you need to revoke your south african citizenship formally, after that they can kiss your .........

 

Citizenship status has little or no effect on your tax residency status.  At best, its an indicator for the "ordinary residence" test of tax residency, which combined with other factors may indicate that you are either a South African tax resident or not (which may be modified by DTA's).  In isolation, its meaningless.

 

Take care if tax planning around citizenship.

[Nev]

XXX you need to read my entire post a few back, it is not the citizenship revoking that clears you from the tax requirement, it is because you have to completely close up shop in south africa combined with no being a citizen that means you no longer need to worry

 

And as a non citizen changes in the law there no longer affect you, for the same reason Brazil cant suddnly decide that i need to start paying tax there as they changed the law and now charge random people tax

Edited July 31, 2019 by Nev

[XXXXX]

I read you previous comments, and I stick by my comments.  Citizenship has little or no bearing on your tax residency status

 

For example, I am still a South African citizen (by choice) and I am definitely NOT a South African tax resident under any definition or interpretation of tax residency.     

 

Also note, that financial immigration (your original point 2), despite the migration agencies sales pitches, is not a separate solution from becoming not ordinarily tax resident.   You can financially immigrate, and still be seen by SARS to be a South African tax resident (although, I must admit, financial immigration is a strong indicator of intent)- and in this regard, I point you to the SARS interpretation note on ordinary residence.   (which is actually a really good read, for someone who wants to know more).  

 

The interpretation note can be found here.   https://www.sars.gov.za/AllDocs/LegalDoclib/Notes/LAPD-IntR-IN-2012-03 - Resident definition natural person ordinarily resident.pdf

 

In particular, I draw your attention to the following two paragraphs.   

The concept of ordinary residence must not be confused with the terms “domicile”, “nationality”, “citizenship” and the concept of “emigrating” or “immigrating” for exchange control purposes.

 

When assessing whether a natural person is ordinarily resident in the Republic, the following factors will be taken into consideration:

• An intention to be ordinarily resident in the Republic. 

• The natural person’s most fixed and settled place of residence

• The natural person’s habitual abode, that is, the place where that person stays most often, and his or her present habits and mode of life

• The place of business and personal interests of the natural person and his or her family

• Employment and economic factors

• The status of the individual in the Republic and in other countries, for example, whether he or she is an immigrant and what the work permit periods and conditions are

• The location of the natural person’s personal belongings

• The natural person’s nationality

• Family and social relations (for example, schools, places of worship and sports or social clubs)

• Political, cultural or other activities

• That natural person’s application for permanent residence or citizenship

• Periods abroad, purpose and nature of visits

• Frequency of and reasons for visits

The above list is not intended to be exhaustive and is merely a guideline.

 

 

 

 

[dme]

Good article that covers much of what was said here already...

 

https://www.moneyweb.co.za/moneyweb-opinion/soapbox/to-financially-emigrate-or-not/

[XXXXX]

one of the better articles on the topic, and certainly way better than the usual garbage distributed by certain migration agenices.

 

 

 

 

[timothy]

Just to update everyone.  I have closed my bank account. Did a income tax return with all ZERO's. Then started and completed the financial emmigration.

 

This all happened over a period of 12-months.

 

Today I logged into SARS eFiling and saw an option that they probably added in the past month whereby I can "DEACTIVATE" my tax type.  I selected income tax, and now the page shows I am not registered for income tax.  Let's see if I am issues any income tax returns to do after June this year!

 

Yay!

 

Is that it? anything else before I can once and for all forget about South Africa?

 

Tim

 

[XXXXX]

On 4/26/2021 at 6:47 PM, timothy said:

 

 

Is that it? anything else before I can once and for all forget about South Africa?

 

 

 

 

The obligation to submit a income tax return is defined by the annual schedule 25 notice issued by SARS.   Key drivers to that include your tax residency status, and nature and source of income.   Financial emigration is a indicator of tax residency - but certainly not the only one (or conclusive).   Key point (technically) however is that you are required to submit an income tax return in the year that you ceased to become a South African tax resident.   You would also declare (by ticking the box) on your annual tax return that you ceased to be a SA tax resident.   

 

So to the extent that you've complied with the above, have no SA source income and are not a SA tax resident as defined by the income tax act - yes, you have no further SA tax obligations.......