Becoming a tax resident of South Africa is a crucial consideration for any foreigner looking to live and work in the country. As a tax resident, you will be required to pay tax on your worldwide income, which includes any income earned in your home country or any other country you have lived in.
In this article, we will outline the key factors that determine when you become a tax resident of South Africa.
The Ordinarily Resident Test
You may be classified as a tax resident if you are deemed to be “ordinarily resident” in South Africa. This test is a subjective one, and it considers a range of factors such as:
- The length of time you have lived in South Africa
- The nature and purpose of your visits to South Africa
- Your employment status and income
- The location of your family and personal belongings
- Your social and economic ties to South Africa
The term “ordinarily resident” is not clearly defined in the Income Tax Act of 1962, which means court interpretations must be followed.
Often, if you bring your family with you to South Africa, and you stay here for a long period of time, the government will count this as residence.
If you are deemed to be ordinarily resident in South Africa, you will be required to pay tax on your worldwide income, even if you spend less than 183 days in the country.
The Physical Presence Test
The physical presence test is another way of determining tax residency in South Africa. This test considers the total number of days you spend in the country during a tax year, regardless of whether you are a citizen or ordinarily resident. If you spend more than 91 days in South Africa in each of the current and previous five years, and more than 915 days in total over those five years, you will be classified as a tax resident.
In summary, if you fail to qualify as an ordinary resident, you must satisfy the following:
- 91 days in total during the year of assessment under consideration.
- 91 days in total during each of the five years of assessment preceding the year of assessment under consideration.
- 915 days in total during those five preceding years of assessment.
If you can satisfy the above requirements under the physical presence test, you will be classified as a tax resident in South Africa.
This means if you are in the country for four years, but then leave for a year, you do not qualify for tax residency under the physical presence test.
Double Taxation Treaties
In South Africa, double taxation is addressed through tax treaties that are negotiated between South Africa and other countries. These treaties aim to prevent taxpayers from being taxed twice on the same income by both countries.
You can find a list of Double Taxation treaties and protocals on the SARS website.
Tips For Foreigners Immigrating to South Africa
If you are a foreigner planning to move to South Africa, here are some tips to help you understand the tax residency rules:
- Keep track of the number of days you spend in South Africa, as this will help you determine whether you are a tax resident or not.
- Consider obtaining professional advice from a tax consultant or immigration lawyer to ensure that you fully understand your tax obligations.
- If you are a non-resident, make sure you understand your tax obligations in your home country, as you may be required to pay tax on your South African income as well.
- Keep accurate records of your income and expenses, as this will help you when filing your tax returns.
Risks That Must Be Observed
It is crucial to note that failing to comply with South African tax laws can result in severe consequences. This includes penalties, fines, and even criminal charges in some cases. Therefore, it is essential to understand the criteria for tax residency and ensure that you comply with all the relevant tax laws.
How Long the Process Takes
The process of becoming a tax resident in South Africa can vary depending on your circumstances. It is advisable to seek professional advice to get an accurate estimate of how long the process may take.
Compliance with South African tax laws is essential, and failure to comply can result in severe consequences. It is advisable to seek professional advice and ensure that you fully understand your tax obligations.
Q: Do I need to pay tax on my worldwide income if I am a tax resident of South Africa?
A: Yes, as a tax resident of South Africa, you will be required to pay tax on your worldwide income.
Q: What happens if I fail to comply with South African tax laws?
A: Failing to comply with South African tax laws can result in penalties, fines, and even criminal charges in some cases.
Q: Can I rely on the physical presence test to determine my tax residency?
A: Yes, the physical presence test is one of the ways to determine tax residency in South Africa.
Becoming a tax resident of South Africa is an important consideration for any foreigner planning to live and work in the country. By understanding the criteria for tax residency, you can ensure that you are fully compliant with South African tax laws and avoid any penalties or fines. Remember to keep accurate records, seek professional advice if necessary, and stay informed of any changes to the tax laws.
We at IBN Immigration Solutions are not tax consultants; this article is merely a guidine to tax laws in South Africa. Each situation must be treated differently when it comes to tax.
If you are considering moving to South Africa, it is advisable to seek professional advice from a tax consultant or immigration lawyer. They can guide you through the process of becoming a tax resident and ensure that you understand all the tax obligations you will have in South Africa.
Written by Jesse Potgieter, Immigration Consultant
Edited by Simon Carletti, PR and Creative Supervisor