SARS, Double Tax Law & Tax Non Resident

[ORC]

Hi all

 

We all know about the double tax laws coming into South Africa next year.

 

I've immigrated and by SARS own rules, I qualify as a tax non resident.

 

The question is, do I need to apply to be a tax non resident as I don't want to be liable for this double tax.

Edited October 24, 2019 by ORC

[XXXXX]

Briefly

 

On the basis that you're not a South African tax resident as defined in the income tax act etc.   You have no specific obligation to notify or apply to be regarded s a non-resident other that what would be ordinarily required to be declared in your annual tax return (if required to submit one)

 

Your obligation to submit a income tax return is defined by the annual section 25 notice (the 2019 notice can be found here). https://www.sars.gov.za/AllDocs/LegalDoclib/SecLegis/LAPD-LSec-TAdm-PN-2019-01 - Notice 342 GG 42545 28 June 2019.pdf

 

 

Some additional comments

1. You are required to lodge a income tax return (irrespective of the other requirements in the S25 notice), in the year you ceased to be a South African tax resident. 

2.  Financial immigration is not required or is a pre-requisite to be regarded as a non-south African tax resident - nor is it conclusive in determining your tax residence

3. If SARS (and it is included in the S25 Notice), request that you submit a income tax return.,  you are required to submit a return.

4. Onus of proof lies with the taxpayer should SARS challenge your residency status 

 

 

 

Edited October 25, 2019 by XXXXX
correction

[Kodplessis]

Hi All,

 

Not answering this question, but found the topic relevat to my situation, so continuiing on this thread. I have been following a number ot threads on the tax and financial emigration on this forum, however there are so many individual circumstances that I do not have a clear understanding on my own position regarding double taxation, tax residency and tax returns to SARS.  Can someone knowledgeable please see if they can assist me based on my circumstances below?

 

·         I have dual Australian and South African citizenship

·         Permanently moved back to Australia in Jun 2016

·         Sold house in South Africa in April 2017 (declared any capital gains on SARS tax return)

·         Have been completing all SARS tax returns to date (including declaring foreign income in my tax returns)

·         Been living in Australia since Jun 2016, settled down (bought a house, salaried worker and is paying tax and completing annual ATO tax returns)

·         Only visit South Africa every 2 years for about 4 weeks at a time

·         Assets / money left in South Africa:

 

o   One small Retirement Annuity

o   Small amount of cash in bank account (so basically interest in only source of income but falls way under tax threshold)

o   No other income or property of any sort.

 

Questions:

1.       Based the above, am I still deemed a South African tax resident?

2.       Do I need to continue to complete SARS returns every year and if not, how do I go about informing SARS?

3.       Will the double tax coming into effect in 2020 impact me in any way (based on my tax residency status and current tax treaty between SA and Aus)?

 

Any advice / insights will be appreciated. TIA

[XXXXX]

On 11/6/2019 at 11:15 AM, Kodplessis said:

 

1.       Based the above, am I still deemed a South African tax resident?

 

I'll try to address individually.   Key question to respond to this is if you're seen to be ordinary resident in South Africa, and if so, whether a double taxation agreement applies.   Based on the very limited information you've provided,  I'd argue that you're not ordinarily resident in South Africa, and thus are not a South African tax resident (although you my still be obliged to submit income tax returns in SA).

 

I suggest you read here.  

https://www.sars.gov.za/AllDocs/OpsDocs/Guides/LAPD-IT-G29 - PIT FAQs Foreign Employment Income Exemption.pdf

See note 16 - 22

 

https://www.sars.gov.za/AllDocs/LegalDoclib/Notes/LAPD-IntR-IN-2012-03 - Resident definition natural person ordinarily resident.pdf

 

And in particular

 

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.

[XXXXX]

On 11/6/2019 at 11:15 AM, Kodplessis said:

 

2.       Do I need to continue to complete SARS returns every year and if not, how do I go about informing SARS?

 

 

Your obligation to submit a income tax return is dictated by the annual SARS section 25 notice - the 2019 notice can be found here.

 

https://www.sars.gov.za/AllDocs/LegalDoclib/Drafts/LAPD-LPrep-Draft-2018-41 - Draft Notice in terms of Section 25 of the TAA 2011.pdf

 

You'll note that the requirements to submit a return is different for residents and non-residents.  I won't go in to the detail (unless you require).

 

Your obligation to notify SARS is pretty much dealt with here

 

https://www.sars.gov.za/AllDocs/OpsDocs/Guides/LAPD-IT-G29 - PIT FAQs Foreign Employment Income Exemption.pdf

 

See question 19 and 20.

[XXXXX]

On 11/6/2019 at 11:15 AM, Kodplessis said:

 

3.       Will the double tax coming into effect in 2020 impact me in any way (based on my tax residency status and current tax treaty between SA and Aus)?

 

 

Based entirely on the limited information that you have provided above (which can be validated by your assessment of ordinary residence) - no, you won't be affected by the changes referred to commonly as "expat tax"

[Kodplessis]

Thank you so much for providing more clarity on this - much appreciated.

 

Do you have any insights on the capital gains tax payable when I cease to be a tax resident (i.e. how is this calculated and validated) by SARS? Might not be a simple answer and happy to PM for more details if necessary.

 

deemed disposal for capital gains tax purposes takes place at the time when an individual ceases to be a tax resident. The individual will be deemed to have disposed of his or her worldwide assets, excluding immovable property situated in South Africa.

 

Cheers

 

[XXXXX]

10 hours ago, Kodplessis said:

 

 

Do you have any insights on the capital gains tax payable when I cease to be a tax resident (i.e. how is this calculated and validated) by SARS? Might not be a simple answer and happy to PM for more details if necessary.

 

 

 

DM if you would prefer.   But a couple of points.

 

Firstly, South African taxation (effectively) operate on a self assessment basis.   It is your obligation to both declare and calculate you own capital gains (I.e your proceeds/deemed proceeds less base cost/cost).  The onus also lies on you to be able to defend any assumptions and calculations.      

 

You're required to declare your capital gain in the year you ceased to become a non-resident and this is done in your annual income tax return.   

 

The same general rules apply to (normal) capital gains and any capital gains deemed to occur as a result of becoming non-resident.  At a basic level, you declare your proceeds on sale (or in the case of a deemed capital gain, the market value at the time of becoming a non-resident), less the original cost.   This result would be your capital gain, 40% of which is included in your taxable income and which is then (effectively) taxed at your marginal tax rate.

 

Important to note, that the deeming provisions DO NOT apply to all assets.  E.g. Fixed property in South Africa is excluded from the deeming provisions (but do trigger CGT when. you sell the property).  Also excluded (from CGT generally) are the likes of personal use assets and a portion of the capital gain on any primary residence.

 

Should you wish to learn more on capital gains tax, and are willing to read up yourself.  There is a superb comprehensive guide to capital gains tax on the SARS website.  It is some 860 pages long - but well indexed.    It can be found here....

 

https://www.sars.gov.za/AllDocs/OpsDocs/Guides/LAPD-CGT-G01 - Comprehensive Guide to Capital Gains Tax.pdf

 

Should you have any specific questions (or find the guide intimidating), please drop me a note and I'll assist as best I can.

[BellaR]

XXXX

 

would you mind if I DM’d you with a question pls?