South Africa has a residence-based tax system. This means that residents are, subject to certain exclusions, taxed on income received here irrespective of where in the world the income was actually earned.
Non-residents in South Africa, on the other hand, are taxed by SARS only on their locally-earned income.
Since tax systems differ from country to country, there is always a risk that a particular income amount could be taxed twice (in the absence of a Double Taxation Agreement in place with that country).
For an expatriate in South Africa, it is therefore very important to be able to prove that he or she is a non-resident. This can be a tricky scenario, however, because expatriates travel in and out of South Africa for various reasons and periods. Complex methods must therefore be employed by SARS to determine when someone is or is not a non-resident.
A welcome innovation by our revenue service is that SARS now makes it possible for expatriates to apply for a “Notice of Non-Resident Tax Status”. When issued, this is a formal confirmation of the fact that the taxpayer’s status has changed from resident to non-resident, as well as the date from which this is effective. Such a Notice would shield the non-resident from being taxed in South Africa on income earned outside of South Africa.
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