Important message to South Africans who want to leave the country

Emigrating from South Africa is a complex, costly process that requires formally changing one’s tax status with SARS, settling any exit tax, and securing a non-resident tax certificate to avoid being taxed on global income.

This is according to Nedbank, which explained that deciding to leave South Africa permanently is not as easy as simply shutting the door and flying off into the sunset.

Even though many families choose to leave South Africa to pursue opportunities elsewhere, they often do not realise everything that goes into the process, and just how lengthy and costly it can be.

“Emigrating means moving to a new country permanently to settle and perhaps become a citizen,” the bank explained.

“If you’re packing up and don’t plan to return, you need to declare it to the South African Revenue Services (SARS), so that you can be removed from the list of South African taxpayers.”

SARS calls this status ‘ceasing to be a resident for tax purposes’, although it is more commonly known as ‘financial emigration’.

Nedbank explained that until late 2021, this process was plagued by uncertainty over when exactly South Africans are no longer a tax resident.

“Following frustrated complaints, SARS announced it would issue a certificate formally confirming your change in status from now on,” the bank said.

“This means you can now apply for a ‘Notice of non-resident tax status’ that confirms you are officially a non-resident in South Africa.”

Nedbank stressed the importance of emigrants changing their tax status. This is because, if someone is a registered South African taxpayer, SARS claims tax on all their income, no matter where or how they earned it.

“So, if you leave the country permanently and don’t tell SARS, there’s a chance that you could be charged tax on your earnings abroad,” the bank said.

“This is the situation for any South Africans living and working abroad who haven’t cut ties with South Africa. If you’re earning an income while abroad, SARS lays claim to tax on earnings over R1.25 million a year.”

How to stop being a tax resident

According to Nedbank, the only way to leave the country properly and live and work permanently somewhere else is to deregister as a South African taxpayer and register as one in your new country of residence.

“SARS then has no claim over you, unless you earn income in South Africa as well, in which case you’ll be taxed as a non-resident,” the bank explained.

Before someone reaches that point, though, the bank said they need to inform the tax authorities that they intend to leave the country permanently.

“SARS wants to make sure your tax affairs are in order and whether you need to be charged exit tax before you jet off,” it said.

“Your first step is to follow the TCR01 process on the SARS eFiling portal to have an Emigration Tax Compliance Status (TCS) PIN issued to you.”

This PIN is valid for a year and confirms a person’s status as a non-tax resident. If the emigration process takes longer than a year to complete, the PIN will expire, and the taxpayer will need to apply for a new one.

“Basically, the PIN means that SARS is comfortable that you’re not skipping the country, leaving unpaid taxes and gives your bank authorisation to transfer your money into your nominated offshore bank accounts,” the bank explained.

Nedbank said there are several factors that SARS considers when deciding whether to deregister a taxpayer. These include –

• The type of visa someone has to enter a foreign country
• Proof of permanent residence in that country
• A certificate or letter from the revenue authority of that country, confirming the person’s tax residence there
• Details and the purpose of the property someone still has in South Africa
• Details of business interests someone still has in South Africa
• Details of all their family members, whether they live in South Africa or abroad
• Details of the location of your personal belongings and social interests, for example, gym contracts, recreational clubs and societies
• Details of any planned future return visits to South Africa, how often and why

“These are just some of the hoops you’ll have to jump through,” Nedbank said, directing South Africans to the ‘Tax and Emigration’ section on SARS’ website for more detailed information.

Documents required

“You may feel overwhelmed by everything that’s required, so don’t be afraid to get help,” Nedbank said. “It’s a complex process that requires expert knowledge if you want it done as fast as possible with the least hassle.”

The bank explained that South Africans need the following documents in order to apply for a SARS TCS PIN:

• Certified copies of your identity document
• A utility bill (not older than 3 months) showing your residential address abroad
• Full names and identity numbers, or dates of birth, of everyone in your family who must be reclassified.
• Original waiver and indemnity
• Supporting documents for all assets and liabilities declared to SARS
• Confirmation of your non-resident status, in the form of either a foreign passport or a certificate of naturalisation or citizenship

“Uprooting your life to go live in another part of the planet is anything but a quick and easy move. And with this complexity comes a whole lot of costs,” the bank said.

Fortunately, the bank said South Africans can avoid nasty surprises and gain some peace of mind if they speak to our team of non-resident banking experts

“Getting your family and household belongings to your new home is a major logistical and financial challenge,” Nedbank said.

“And when your belongings finally arrive, you may face a customs inspection and possibly even import duties – not the type of surprise you need after just paying exit tax.”

Nedbank explained that this levy is charged when South Africans officially exit the country and the local tax system.

“The justification is that SARS considers your leaving the country as selling your worldwide assets to your foreign self,” the bank said.

“This triggers capital gains tax, because SARS argues that it would have claimed tax on those assets if you’d sold them while you were still a tax resident.”

The bank added that emigrants will also probably need to submit at least one more tax return – even after they’ve emigrated.

This is due to the delay between the end of the tax year and the deadline for tax submissions, which can range from 6 to 18 months.

Since the National Treasury changed the rules in 2021, emigrants can no longer take their retirement savings with them when they emigrate.

Following this change, emigrants must now wait three years before they can access their retirement savings as a lump sum.