Important message to South Africans who want to leave the country

South Africans planning to leave the country permanently must deregister as tax residents with SARS through a complex financial emigration process to avoid unexpected taxes and compliance issues.

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

“Emigration is a complicated, lengthy and costly process that involves more than you may be aware of,” the bank warned.

Importantly, Nedbank explained that there is a difference between working abroad with a temporary work visa or as a permanent resident and emigrating.

Unlike South Africans who are simply working overseas, emigrating means moving to a new country permanently to settle and perhaps become a citizen.

“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’, but it is more commonly known as ‘financial emigration’.”

Nedbank said that until late 2021, this process was plagued by uncertainty over when exactly the person emigrating is no longer a tax resident.

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

“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 prospective expats changing their tax status, since SARS taxes all income of registered South African taxpayers, regardless of where or how it is earned.

“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.”

“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 resident for tax purposes

The only way to leave the country properly and live and work permanently somewhere else, Nedbank said, 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.”

“Before you get to that point, though, you need to inform the tax authorities that you intend to leave the country for good.”

This is because SARS wants to ensure that expats’ tax affairs are in order and determine whether they need to be charged exit tax before leaving the country.

The first step in this process, the bank explained, is to follow the TCR01 process on the SARS eFiling portal to obtain an Emigration Tax Compliance Status (TCS) PIN.

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

“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.”

According to Nedbank, there are several factors that SARS considers when deciding whether to deregister an applicant. These include:

• Type of visa held to enter the foreign country, or
• Proof of permanent residence in that country, or
• A certificate or letter from the revenue authority of that country, confirming tax residence there.
• Details and the purpose of the property still held in South Africa.
• Details of business interests still held in South Africa.
• Details of all family members and whether they live in South Africa or abroad.
• Details of social interests – such as gym contracts, recreational clubs, and societies – and the location of personal belongings.
• 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,” the bank said. “Go to Tax and Emigration on the SARS web page for more detailed information.”

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

Nedbank explained that those looking to move out of South Africa also need certain documents to apply for a SARS TCS PIN:

• Certified copies of their identity document.
• A utility bill (dated within the last 3 months) showing a residential address abroad.
• Full names and identity numbers, or dates of birth, of everyone in their family who must be reclassified.
• Original waiver and indemnity.
• Supporting documents for all assets and liabilities declared to SARS.
• Confirmation of non-resident status – either a foreign passport or certificate of naturalisation or citizenship.

Avoid nasty surprises

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

If expats do not carefully plan their move or rely on an expert for guidance, they can easily run into some nasty surprises when they leave the country.

“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.”

This levy, the bank explained, is charged when a South African officially exits 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.”

“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.”

Expats will also probably need to submit at least one more tax return – even after you’ve emigrated, the bank said.

“This is because of the delay between the tax year ending and the deadline for tax submissions, which can be anything from 6 to 18 months.”

“Remember, National Treasury changed the rules in 2021 so that you can no longer take your retirement savings when emigrating.”

Following this amendment, expats must wait three years before they can get access to their retirement savings as a lump sum.