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South African non-resident managing finances

Non-resident and Foreign Tax in South Africa

Working abroad affects how much tax you pay and in which country you need to pay it. How you get taxed in South Africa depends on your tax residence status. 

This article covers everything you need to know about what makes you a non-resident according to the South African tax system and whether the foreign income you receive outside of South Africa is taxable. 

What is a Tax Non-resident in South Africa?

For you to know if you meet the criteria as a non-resident in South Africa, it’s important to understand what a South African resident is. 

There are different types of residents in South African law, like those specified by the Income Tax Act, 1962 under the "physical presence test" and those defined as ordinarily resident in South African common law. 

Any person who passes all three conditions of the physical presence test or is ordinarily resident (a South African common law concept) during the tax assessment year is automatically a resident for tax purposes. 

An individual is ordinarily resident in South Africa only if it is a place they will naturally return to after leaving the country. It is that person’s usual place of residence. 

If you don’t meet the requirements to be ordinarily resident, you may be a resident according to the physical presence test. However, you should meet the following criteria to be a South African resident: 

  • You have stayed in South Africa for 91 days or more during the current assessment year. 
  • You have spent a total of at least 91 days during each of the previous five assessment years. 
  • You have spent more than 915 days throughout those five assessment years. 

If you do not pass the physical presence test and are not ordinarily resident, then you will be considered a non-resident of South Africa for tax purposes. This means that you will only have to pay taxes on income received in South Africa and declare a tax return on them. 

How to Become a Tax Non-resident of South Africa

There are ways for people to cease being South African tax residents and, in turn, become a non-resident. This is based on how the individual has become a tax resident in South Africa. 

Here is a list of the factors that will be used to judge whether you’re no longer a South African tax resident

  • The type of visa you have used to travel abroad. 
  • A letter from the foreign revenue authority stating that you are a tax resident in that country or a certificate of tax residence from that authority, if available. 
  • Proof of ongoing residency in that foreign country, if applicable.
  • Specifics about any South African real estate you may still have. List what you are using the property for. 
  • Details about whether your family members are still in South Africa and why they are there. 
  • Information on any future visits to South Africa, including how often they visit and for what reasons.  
  • Information on any business involvement you may continue to have in South Africa, such as investments and employment. 
  • Information on your social interests, including where your personal items are located and your memberships in any clubs and recreational groups. 

If a person is a resident as judged by the physical presence test, they may stop being a resident when they are outside the country for at least 330 consecutive days. The day the individual leaves South Africa will be the day they are no longer seen as a resident. 

Also, when a person applies for a double tax agreement, the person who formerly qualified as a resident for South African tax purposes will no longer qualify. 

How to Declare that You Have Ceased to be a Tax Resident of South Africa 

If you no longer qualify as a South African tax resident, you should notify the South African Revenues Service (SARS) using the Registration, Amendments and Verification Form (RAV01) on eFiling. You can do this by noting the date you have stopped being a tax resident in the Income Tax Liability Details section. 

You can attain this form by visiting the SARS client information system page or contacting a SARS branch to make an appointment. 

After you complete your RAV01 form and update the date you stopped being a tax resident, SARS will inform you about which supporting documents you should submit. 

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Can Non-residents in South Africa Own Property? 

Once you’re no longer a tax resident of South Africa, there are no restrictions on your immovable property in South Africa. 

There are still some non-resident taxes you need to know about when owning South African property. 

According to section 35A of the Income Tax Act, the buyer must withhold some of the total selling prices if it is equal to or greater than R2 million if the property seller doesn't qualify as a tax resident of South Africa. 

The company or person owning the property will choose what portion of the total will be withheld. For instance, if the registered owner is an individual, 7.5% of the proceeds should be withheld. If the registered owner is a business, 10% must be withdrawn. Lastly, if the registered owner is a trust, 15% must be withheld. 

The payment must be made to SARS within 28 days after the amount is withheld if the buyer is a non-tax resident. If the buyer had an honest suspicion that the seller was a non-resident, they could be held accountable if the money is not withheld. 

The following situations allow for a decrease or exemption of the withholding tax: 

  • If the seller requests a directive from SARS releasing them from section 35A withholding tax if they can offer security for any tax obligation resulting from the sale of their immovable property. 
  • If the seller is not liable to tax regarding the sale of their property, they can apply for this directive. 
  • If the tax liability at the moment of disposal is lower than the amount determined if the percentages are applied, the seller may also request a directive. 

The non-resident will also be exempt from the withholding tax if they can demonstrate to SARS that they were present in South Africa for over 183 days overall in the 12 months before the date the interest is paid. 

They can also achieve this if the obligation is related to a registered taxpayer's non-resident permanent establishment.

How to be Exempt from Foreign Income Tax? 

As long as you think the country is your primary residence, you’ll need to make foreign income tax payments in South Africa. Thankfully, there are ways you can be exempt from South African foreign income tax. 

Under section 10(1)(o)(ii) of the Income Tax Act, a South African tax resident who provides services outside of the country and earns income there for more than 183 days within 12 months or continuously for more than 60 days during the same 12-month period is not subject to tax payments. 

This 183 days tax rule has been effective since 1 March 2020 and is only relevant for the first annual R1.25 million of the tax resident’s foreign employment income. 

Once the tax resident has earned more than R1.25 million foreign income per year, they will be taxed according to the tax tables for that assessment year

View SARS Tax Brackets & Tax Tables for 2023-2024

What is the Difference Between Non-resident Tax and Foreign Tax? 

Non-resident tax means the tax non-South African residents have to pay. As mentioned before, if an individual does not pass the ordinarily resident test or physical presence test, they are a non-resident. 

That’s why the only tax SARS will charge them will include their South African-sourced income. 

Foreign tax refers to the expat tax SARS expects South African residents to pay when working abroad. This is calculated after the first R1.25 million tax residents earn per year outside of the country. 

Do you need help managing your South African-sourced income tax or foreign income tax? QuickBooks’ accounting software works to help make small businesses' finance management easier than when done manually. Try a free 30-day trial today.

Disclaimer: This page is provided for general information purposes only and does not constitute accounting, tax, business, or legal advice. You should always consult your own advisors for advice relating to your business or situation. Always consult SARS directly as information changes from time to time.

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