South African Tax Laws for Expats and Non-Residents

South Africa is known for its diverse culture, landscapes, and wildlife, making it a popular destination for both expats and tourists.

However, tax laws in South Africa can be quite complex, and understanding them is crucial for expats and non-residents.

In this article, we will delve into the basics of South African tax laws, including who is considered a tax resident, how to file taxes, and what exemptions are available.

Who is considered a Tax Resident in South Africa?

According to the South African Revenue Service (SARS), you are considered a tax resident if:

You are physically present in South Africa for more than 183 days in a year;
You have a permanent residence in South Africa; or
You meet all three requirements of the “ordinarily resident” test.

The ordinarily resident test is subjective and takes into account factors such as your intention to stay in South Africa, your social and economic ties to the country, and the length and purpose of your visits outside of South Africa.

Taxable Income for Expats and Non-residents

Expats and non-residents are taxed on their income sourced within South Africa, such as salary, rental income, and capital gains from the sale of immovable property in the country.

Non-residents are not subject to tax on interest earned from South African banks or dividends from South African companies.

Filing Taxes as an Expat or Non-resident

Expats and non-residents must register for tax with SARS if they have taxable income sourced within South Africa. They can do this by completing the relevant forms and submitting them to SARS.

Tax returns must be filed annually by the end of November, and payment must be made by the end of January of the following year.

Tax Exemptions for Expats and Non-residents

Expats and non-residents may be eligible for certain tax exemptions, such as the foreign employment income exemption.

This exemption allows expats to exclude up to R1.25 million of their foreign employment income from their taxable income in South Africa, provided that they meet certain criteria.

Double Taxation Agreements

South Africa has double taxation agreements with many countries to avoid double taxation of income.

These agreements determine which country has the primary right to tax specific types of income.

Expats and non-residents should check if their home country has a double taxation agreement with South Africa to avoid being taxed twice.

Penalties for Non-compliance

Expats and non-residents who fail to comply with South African tax laws may face penalties and fines.

These penalties can be severe and may include interest on unpaid taxes, additional taxes, and criminal prosecution.

Tax planning tips for expats and non-residents

Expats and non-residents can minimize their tax liabilities in South Africa by:

Understanding the tax laws and regulations in the country.
Utilizing tax exemptions and deductions that apply to their situation.
Making use of double taxation agreements between South Africa and their home country.
Consulting with a tax professional to ensure compliance and minimize tax liabilities.