South African tax residents are taxed on their worldwide income (as opposed to source income for non-tax residents), making tax residency an important inquiry. There are two tests for natural persons to determine their tax residency.
The first is the ordinarily resident test, which determines your tax residency based on where you naturally return to after your wanderings. This would be the place that you consider your real home. Your subjective intention is important but must be supported by objective factors, such as how often you return and where your property, family, economic, and social interests are located.
The second is the objective physical presence test, which considers the number of days spent in South Africa over a period of six years. To be a tax resident in terms of the physical presence test, a natural person must be physically present in South Africa for a period or periods exceeding –
- 91 days in total during the year of assessment under consideration, as well as
- 91 days in total during each of the five years of assessment preceding the year of assessment; and
- 915 days in total during those five preceding years of assessment.
When applying the above tests, it is also possible that you could be considered to be a tax resident in both South Africa and another country. To ensure that double taxation does not arise in these circumstances, the residence tie-breaker provision of the double taxation agreement between South Africa and that other country (if applicable) should be consulted.
Tax residency and the date of becoming (or ceasing) to be a tax resident is a complex matter with various factors to consider, including the formal communications with the South African Revenue Service. We recommend that any uncertainties be discussed with your tax experts with reference to your specific facts.