SARS reveals all the questions South Africans need to answer before they can ditch their tax residency status

The South African Revenue Service (SARS) is subjecting South Africans seeking to end their tax residency to far greater scrutiny.

The taxman is now using a detailed questionnaire to determine whether these South Africans have become tax residents of another country.

Tax Consulting SA’s Legal Manager of Cross-Border Taxation, Delano Abdoll, warned that South Africans living and working abroad now face a new hurdle.

SARS is now asking 17 probing questions before granting a confirmation of non-resident tax status, which is often viewed as the final step in their tax emigration journey.

These questions range from everything from where the taxpayer’s spouse lives and where they keep their personal belongings to whether they have applied for permanent residence or citizenship abroad.

Historically, taxpayers have focused on obtaining a foreign Tax Residency Certificate, updating their SARS records, and demonstrating that they have left South Africa, Abdoll said.

However, recent correspondence on SARS suggests that the process has become considerably more sophisticated.

For example, in one verification process involving a taxpayer who relied on a Double Tax Agreement (DTA) to support a non-residency position, SARS issued a detailed information request.

The taxman’s request comprises a long list of separate questions aimed at testing whether the taxpayer genuinely qualified for treaty relief.

The questions provide a rare insight into how SARS is approaching DTA-based residency claims behind the scenes.

They may also signal the direction of future verification processes. Abdoll explained that the significance of these questions is not necessarily the individual answers.

“What is noteworthy is that SARS appears to be conducting a comprehensive treaty residency analysis rather than simply reviewing whether a taxpayer has physically left South Africa,” Abdoll said.

“The questions mirror many of the factors contained in international treaty tie-breaker provisions.”

What SARS Wants to Know

The questions posed by SARS extended far beyond the taxpayer’s departure date, Abdoll said. Among other things, SARS sought information regarding:

• The taxpayer’s intention when leaving South Africa
• Their most fixed and settled place of residence
• Their habitual abode and day-to-day lifestyle
• The location of their business and personal interests
• The location of their spouse and family’s interests
• Employment arrangements and contract terms
• Banking relationships and financial interests
• Immigration and residency status in a foreign country
• The location of personal belongings
• Social, cultural and community connections
• Whether permanent residence or citizenship had been sought abroad

“Viewed collectively, it is clear that SARS is not simply asking whether a taxpayer has relocated,” Abdoll said. “It is seeking to determine where the taxpayer’s life is genuinely centred.”

For South Africans looking to ditch their tax residency status, it is important to note that many DTAs contain so-called “tie-breaker” provisions.

These provisions apply where a person may simultaneously be regarded as tax resident in two countries under their respective domestic laws.

In such circumstances, the treaty must determine which country has the stronger claim to exclusive residence, Abdoll explained.

Depending on the treaty involved, factors such as permanent home, centre of vital interests, habitual abode and nationality may become relevant.

Significantly, Abdoll said many of the revenue service’s questions appear to be directed precisely at these concepts.

“The enquiry, therefore, goes far beyond a review of passport stamps or travel records. Instead, it seeks to establish the broader factual matrix required to apply the treaty correctly,” he said.

SARS turns up the heat on taxpayers

A common misconception among expatriates is that tax residency automatically ends when they leave South Africa. While physical departure remains an important fact, Abdoll stressed that it is only one part of the overall analysis.

“A taxpayer may have relocated abroad but still maintain significant personal, economic or family connections to South Africa,” he said.

“Conversely, another taxpayer may be able to demonstrate that the centre of their life has shifted decisively to another jurisdiction. The difference lies in the facts.”

According to Abdoll, the questions now being posed by SARS suggest that the revenue authority is increasingly focused on understanding those facts in detail.

“The 17-question verification request does not appear in isolation. It follows several recent developments indicating increased scrutiny of DTA-based non-residency claims,” he said.

Over the past year, South African taxpayers have experienced an increase in requests for supporting documentation.

They have also felt an increased focus on treaty tie-breaker provisions and greater scrutiny of the dates upon which treaty residence is said to arise.

“Taken together, these developments suggest that SARS is moving towards a far more evidence-based approach to international tax residency disputes,” he said.

Abdoll added that the message emerging from SARS is becoming increasingly clear. Taxpayers relying on a DTA should expect SARS to look beyond departure dates and foreign tax certificates.

“Instead, the focus appears to be shifting towards the underlying facts that demonstrate where a taxpayer’s life, family, economic interests and long-term connections are genuinely located,” he said.

“The most revealing aspect of the 17 questions is therefore not the questions themselves. It is what they tell us about SARS’ approach.”

For taxpayers claiming treaty non-residency, Abdoll said SARS is no longer merely asking whether they left South Africa. Today, it is about asking whether the facts support the conclusion that they are truly residents elsewhere.