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SARS is now formally issuing affirmation of tax non-residency letters. The letter serves as a further affirmation one’s non-tax residency, with pre-existing documentation having an expiration date and never at all times suffice in coping with some tax non-resident issues. Nevertheless, this has sparked some confusion amongst the South Africans working overseas who will not be positive of the distinction between the SARS non-resident affirmation letter and the Emigration Tax Compliance (TCS) Pin.
The Distinction
The SARS Non-Resident Tax Standing Affirmation Letter is a letter confirming that one has ceased to be a tax resident of South Africa with a sign of the efficient date tax residency was ceased.
The Emigration Tax Compliance (TCS) PIN is a affirmation that one receives when efficiently present process the monetary emigration (ceasing of tax residency) course of with SARS. That is the place one declares their remaining South African property and complies with the ‘exit tax’ process to substantiate tax non-residency.
To have the ability to apply for the SARS Non-Resident Tax Standing Affirmation Letter one will need to have already accomplished the monetary emigration (ceasing of tax residency) course of by SARS. SARS will then subject the extra affirmation letter confirming tax non-residency, because the TCS pin for Emigration is simply legitimate for 1 yr from date of subject.
In the end, the aim is to take away any doubt or confusion arising from the 1-year validity interval of the TCS pin.
Understanding Tax Resident vs Tax Non-Resident
As a Tax Resident, you might be legally required to submit tax returns to SARS yearly and declare your worldwide earnings (native and overseas) after which declare any exemptions or tax credit on the overseas earnings.
Importantly, if you don’t formally word your self as tax non-resident with SARS, then you may be seen as a tax resident in SA. Even when you’ve got damaged our tax residency assessments, being the ordinarily residence take a look at and bodily presence take a look at, or there’s a Double Taxation Treaty in place, these elements will not be going to robotically change your standing to tax non-resident. The one approach to change your tax standing is to formally bear the related authorized processes by SARS.
Merely ticking a field on a tax return or being bodily absent from SA doesn’t stop your tax residency in South Africa. The SA tax system works on two rules –
(a) the onus is on the taxpayer to declare their tax place; and
(b) the taxpayer then bears the onus of proof, on a stability of possibilities, to supply proof of their declared tax place.
As a tax non-resident, South Africa’s expatriate tax regulation not applies, and you’ll not be liable to pay tax in South Africa in your overseas earned earnings. SA tax non-residents are solely taxed on SA sourced earnings.
Advantages of Ceasing your Tax Residency
After ceasing your tax residency, you’ll begin to benefit from the many advantages of being an SA tax non-resident, therefore the significance of getting all the required and proper documentation.
A few of the advantages of being a tax non-resident are:
- You may be taxed on South African sourced earnings solely;
- Capital good points tax will solely be relevant on mounted property situated in South Africa /property of everlasting institution;
- No different capital good points tax;
- No world-wide tax even on remittances; and
- No donations tax and / or property obligation.
Monetary Emigration additionally supplies the uncommon alternative to encash your retirement annuity in full when you have been tax non-resident for 3 years.
In case you are not sure of your present tax standing, it is important you conduct a tax diagnostic train to evaluate your place per SARS’ information. The train will reveal for those who appropriately ceased your tax residency in keeping with South African laws and within the formal strategy of declaration by SARS. It’s at all times greatest to hunt specialist advise on the subject of cross-border taxation and tax residency issues, particularly when complemented by authorized specialists.
Lovemore Ndlovu – SARS and Trade Management Specialist at Tax Consulting SA; Victoria Lancefield – Common Supervisor, Monetary Emigration & Tax Residency at Tax Consulting SA.
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