There are two tests to determine if you are a South African tax resident. The first, being the “ordinarily resident” test, which is a subjective test and finds its grounds on various objective factors. The second, very factual and based on the number of days you physically spend in South Africa.
There is no formal definition of what “ordinarily resident” means – the information available has been developed in our courts over many years and it’s essentially a factual question. SARS has summarised these developments into a useful Interpretation Note. Some of the questions used to determine if you are “ordinarily resident” are:
- Where is your habitual abode, i.e. the place where you stay most often, your present habits and way of living?
- Where is your place of business and personal interests, family, employment and economic factors?
- What is your nationality? Remember, residency/nationality for home affairs purposes does not necessarily translate to income tax residency.
So basically, the essence of the test is where you call your “real home”. There are also no hard and fast rules, and each case is judged on the facts.
Even if you are not a South African tax resident based on being “ordinarily resident”, you can still be a tax resident based on the number of days you spend in South Africa by virtue of the physical presence test or sometimes colloquially referred to as the “days” test.
The “days” test, which can only be triggered after 6 years, should be performed on an annual basis and should meet each of the three criteria below:
- Being physically present in SA for an aggregate number of 91 days during the tax year in question;
- Being physically present in SA for an aggregate number of 91 days during each of the previous 5 tax years; and
- Being physically present in SA for an aggregate number of 915 days during those 5 tax years.
Since the “days” test is performed annually, it’s relatively easy to manage your affairs in such a way so as not to meet the criteria and be considered a non-South African tax resident (at least on this test).
Consequently, once you have established that you do not meet either of the above the tests – if can be concluded that you are no longer a South African Tax resident.
Firstly, ceasing your South African tax residency can trigger an exit charge, which relates to a deemed disposal of your assets. This would bring about a capital gains tax (CGT) event the day before you cease to be a South African tax resident.
Being a non-South African tax resident means that you are only taxed in South Africa on what you earn in South Africa (i.e. income from a South African source). Be it for example South African rental income or interest. To note, if you are receiving income from a South African employer or business whilst you are based full-time in another country, the income earned will not be seen as a South African source income. This is because according to South African tax law, the source of employment income is where the employee physically performs those services. Provided you are no longer a tax resident, and the services are not performed (physically) in South Africa, it will not be taxed in South Africa.
You would need to file your annual return and indicate the year for which you ceased to be a Tax Resident of South Africa.
Should you cease to be tax resident during a year of assessment, your return will be filled proportionally– for the time being a tax resident and non-resident.