South African expatriates working and residing abroad have been urged to review their tax residency status with the South African Revenue Service (SARS) to avoid potential penalties and tax complications. Recent updates to SARS systems and forms have exposed inconsistencies in the tax records of many expatriates, leading to confusion and potential liability for taxes on foreign income.
Lovemore Ndlovu, head of SARB Engagement and Expatriate Compliance at Tax Consulting SA, highlighted the challenges expatriates face, noting discrepancies between prior tax residency declarations and their status as reflected on SARS’s eFiling platform. These discrepancies primarily affect individuals who formalised emigration under earlier frameworks or those whose tax residency status was never properly updated.
According to Ndlovu, expats who previously secured a SARS Notice of Non-Resident Tax Status Letter to confirm their non-residency often discover that the eFiling platform has reverted them to tax residency. This issue predominantly impacts three categories of expatriates:
1. Those who emigrated before 2001, when South Africa’s residency-based tax system was introduced.
2. Individuals who formalised emigration through the South African Reserve Bank (SARB) before 2021.
3. Recent expatriates who have completed tax emigration through SARS under the current regime.
The implications of these errors are significant. While South African tax residents are liable for worldwide income taxes, non-residents are only taxed on income sourced within South Africa. Erroneous classification could lead to unwarranted tax assessments and penalties.
To address these issues, SARS recently updated the Registration, Amendments, and Verification Form (RAV01). The new version includes a dedicated section for declaring changes in tax residency, streamlining the process and centralising compliance measures. However, the update also revealed that earlier informal declarations, such as ticking a box on annual tax returns, were insufficient for formalising non-residency.
Ndlovu explained that the updated RAV01 form enables SARS to audit and verify tax residency declarations more rigorously. Questions concerning an individual’s physical presence, family ties, and financial interests help identify cases of “accidental residency” or misinterpretation of tax obligations.
The need for vigilance has been underscored by changes introduced in 2021, when responsibility for financial emigration shifted from SARB to SARS. Financial emigration, once sufficient for expatriates to transfer assets abroad, no longer exempts individuals from tax compliance obligations. Non-residents must still file annual tax returns for South African-sourced income, ensuring alignment with local tax laws.
Expatriates are encouraged to verify their tax residency status on SARS eFiling and rectify any inaccuracies well in advance of the tax filing season. Accurate declarations and compliance with the updated RAV01 verification process can help expatriates avoid unnecessary audits, penalties, or prolonged disputes with SARS.
