SARS blocking tax refunds for one group of South Africans

The South African Revenue Service (SARS) is increasingly blocking tax refunds for South African expats, leaving refunds on hold until profiles are fully updated and verified.

No expat wants to start the year with a message from SARS saying their income tax refund is on hold because their banking details on the taxman’s records are invalid.

However, Tax Consulting SA’s SARS Tax Compliance Specialist Chrispos Seete said this scenario is becoming increasingly common.

It is particularly common among South African expats and former residents who have left the country and closed their local bank accounts.

“The situation is often compounded where taxpayers have failed to update their contact details with SARS, resulting in important correspondence going unnoticed,” Seete said.

He explained that this trend coincides with SARS’s intensified verification and anti-fraud controls over the past few years.

“While these measures strengthen the integrity of the tax system, they also mean that outdated banking and contact details now frequently trigger automatic refund blocks, particularly for expats,” he said.

Unfortunately, many South African taxpayers only discover that a tax refund is due once they receive standard correspondence from SARS stating that it is on hold because the banking details on the taxman’s records are invalid.

Under section 190(2) of the Tax Administration Act (TAA), SARS is required to pay a refund only once it is satisfied that the amount is properly refundable and that all verification requirements have been met.

“Where banking details are outdated, closed, or not properly verified, SARS will automatically place the refund on hold until the issue is resolved,” Seete said.

“In most cases, this is not a system error, but rather a compliance issue linked to outdated taxpayer information.”

Many South African taxpayers who emigrate or relocate abroad will close their South African bank accounts and change their residential and contact details – all without updating their SARS profiles and eFiling details.

“When a tax return is submitted, often to finalise tax affairs or access retirement funds, SARS assesses a refund. However, the refund cannot be released because the banking details on record are no longer valid,” Seete said.

Hidden stumbling block for expats

Seete explained that while SARS allows refunds to be paid into foreign bank accounts, strict requirements must be met. To release a refund to a foreign bank account, the taxpayer must –

• Complete and submit a SARS Foreign Refund Release form
• Provide confirmation of the foreign bank account in the taxpayer’s name
• Submit supporting documentation as required by SARS
• Ensure that their SARS profile and contact details are fully compliant

Until this process is completed and approved, Seete warned that SARS will keep the refund on hold. He also stressed that though foreign refunds are permitted, the process is not automated and typically involves additional verification.

Challenges often arise where the taxpayer no longer has access to their original eFiling profile, and supporting documents are incomplete or incorrectly submitted.

Problems are also common where SARS requests further verification or clarification, or appointments are required to finalise profile changes.

“It is also important to note that SARS will not pay refunds into call accounts, bond accounts, or credit card accounts, which further limits available options for taxpayers who have exited the South African banking system,” Seete said.

“For taxpayers residing abroad, these requirements can significantly delay the release of refunds that are legitimately due.”

Seete noted that when South Africans move abroad, their to-do list is long, ranging from obtaining visas and housing to banking and adapting to a new culture.

Amid the commotion and disruption of relocation, taxpayers often overlook the need to update their bank details with SARS.

“A SARS refund being ‘on hold’ does not mean it has been denied; it means SARS requires additional verification. For expats, this often involves confirming foreign banking details and updating outdated taxpayer information,” Seete said.

“Managing a SARS refund hold, especially from abroad, requires an understanding of SARS’ administrative processes.”

He explained that experienced tax practitioners can assist by identifying the exact reason a refund has been placed on hold and preparing and submitting the necessary SARS Release of Funds documentation.

They can also help taxpayers verify foreign bank account details in accordance with SARS requirements and manage ongoing correspondence and follow-ups with SARS.

“In matters like these, there is no substitute for expert guidance to ensure that tax refunds are released efficiently and in full compliance with applicable regulations,” he added.