It is not to say that all South Africans who have started a new life overseas – whether for an extended period or permanently – have or want to sever all ties with their country of birth. Many still have bank accounts and pension money in South Africa or may want to buy property here for a variety of reasons.
John-Paul Fraser
Team Lead: Cross-Border Taxation
Mbalenhle Mahlaba
Expatriate Tax Specialist
Even though many of the estimated 915,000 South African expatriates abroad, have formally ceased their status as tax-residents with the South African Revenue Service (SARS) in order to protect their worldwide income from the South African tax net, it doesn’t mean all their dealings with, and in South Africa abruptly comes to an end.
The cessation of tax residency means SARS can only tax you on South African sourced income. Ceasing tax residency can be temporary if making use of a Double Tax Agreement between South Africa and the new country of residence, or permanent through the once-off Financial Emigration process.
After finalising Financial Emigration individuals can keep all their assets in South Africa, but non-resident taxpayers must comply with specific regulations when it comes to their ongoing interests in South Africa such as transferring of funds and how short a short visit should be to not retrigger tax residency.
Keep the following in mind to stay on the right side of the law:
Non-tax resident bank account holders are not allowed credit facilities such as credit cards and an overdraft but have access to savings products.
When applying for a mortgage loan from a South African bank to buy property in South Africa, the non-tax resident bank account holder will be able secure a bank loan of up to 50% of the property value.
Banks would first consider the value of one’s remaining South African assets and try to use that as a capital base to support the lend. If one does not have any remaining South African assets or has externalised all of them, banks would then revert to the 50% loan to value lending.
The good news is that the 3–year lock-in period does not apply to early withdrawal from the Savings Pot under the newly introduced Two Pot Retirement System. Expatriates may immediately make one withdrawal per tax year from their savings pot, but tax compliance is once again the starting point to access these funds.
In case of any non-compliance in South Africa, SARS will deduct money from the withdrawal amount to settle any outstanding tax.
The Tax Administration Act and South Africa being a signatory to the Common Reporting Standards (“CRS”) oblige all financial institutions to report taxpayer information electronically to SARS and local and foreign financial institutions are required to report on financial data relating to foreign and national accounts.
For tax non-resident bank account holders, the transfer of capital funds abroad will always require an Approval International Transfer (AIT) TCS PIN from SARS. On the other hand, income funds will require a Good Standing TCS PIN from SARS. This is for the purposes of verification of tax compliance before transfer is authorised.
Expats are not limited to any amount when transferring funds abroad but need an AIT for every cent that leaves South Africa.
Take note that non-tax residents do not have the Single Discretionary Allowance (SDA) available to them as is the case for tax residents. The SDA allows tax residents to transfer up to R1 million in a year, without being required to produce documentary evidence relating to the funds.
The only exception is that those who ceased tax residency may, in the same calendar year that they cease to be residents, transfer up to R1 million as a travel allowance, without the requirement to obtain an AIT TCS PIN letter. This is a once-off dispensation.
For transfers over R10 million an additional SARB Financial Surveillance Department approval is required before your bank can transfer the funds abroad. This can take time and must be considered in your tax planning when you formally emigrate and cease tax residency. Professionals who understand these complexities are best placed to give guidance and assistance.
Typically, non-tax resident accounts cannot be funded by resident sources, i.e., gifts, cash Rand deposits or EFTs. These accounts can be funded by local Rand funds from capital assets and funds from abroad. (Capital assets are the remaining assets, which are South African sourced, which were declared to SARS at the time of formalising cessation of tax residency.)
South Africans who live and work abroad, must familiarise themselves with the requirements to maintain non-resident taxpayer status when visiting South Africa for short periods. If one should, so to speak, overstay their welcome insofar as the physical presence test goes (taking into account the average time spent physically present in SA in a specified period), it can unintentionally re-trigger tax residency with all the tax obligations to SARS that comes with it.
