Double Taxation

Introduction

Timely notification to the South African Revenue Service (SARS) about your departure and a thorough understanding of Double Taxation Agreements (DTAs) are key steps in managing your tax obligations effectively. This article explores the best time to inform SARS of your move and explains how DTAs can help prevent double taxation and optimise your tax situation.

Informing SARS of Your Departure

Timing and Importance

“The best time to inform SARS of your departure is as soon as you make the decision to leave South Africa for an extended period or permanently,” Says Thomas Lobban from Ibex Consulting “Prompt notification helps ensure that your tax affairs are managed correctly and can prevent any misunderstandings or penalties. It is particularly important if you intend to cease tax residency, as this has significant tax implications.” Continues Lobban.

Steps to Notify SARS

• Update Your Details: Log into SARS eFiling and update your personal details, including your new address abroad.

• Submit a Final Tax Return: Submit a comprehensive tax return for the year of your departure, including all income earned up to the date you leave. Indicate your intention to cease tax residency.

• Apply for a Tax Clearance Certificate: Obtain a tax clearance certificate to confirm that your tax affairs are in order. This involves a detailed application process and ensures that you have no outstanding tax liabilities.

• Provide Supporting Documents: Be prepared to provide documents such as your new residence visa, employment contract abroad, and proof of accommodation to substantiate your claim of non-residency.

Ibex Consulting can help guide you through the steps mentioned above in order to ensure that the correct steps are followed, and all the information is correct in order to ensure a smooth transition.

Double Taxation Agreements (DTAs)

What Are DTAs?

Double Taxation Agreements (DTAs) are treaties between two countries designed to avoid double taxation of income earned in both jurisdictions. South Africa has DTAs with numerous countries to protect taxpayers from being taxed twice on the same income, thus promoting international economic activity.

Key Provisions of DTAs

• Tax Residency: DTAs help determine which country has the primary right to tax certain types of income based on tax residency rules. This is crucial for expatriates to avoid dual tax residency.

• Tax Credits and Exemptions: DTAs often include provisions for tax credits or exemptions to prevent double taxation. For example, if you pay tax on your income in the host country, you may receive a credit or exemption for that tax in South Africa.

• Permanent Establishment: DTAs define what constitutes a permanent establishment, which is important for determining tax liabilities of businesses operating in multiple countries.

Applying DTAs

• Identify Relevant DTA: Determine whether a DTA exists between South Africa and your new country of residence. Each agreement has specific provisions that must be understood and applied correctly.

• Obtain a Certificate of Tax Residency: To benefit from a DTA, you may need to provide a certificate of tax residency from the foreign country’s tax authority, confirming your tax status.

• File Annual Returns: Despite the provisions of DTAs, you are still required to file annual tax returns in both countries, reporting all relevant income and claiming applicable tax credits or exemptions.

Conclusion

Informing SARS of your departure and understanding Double Taxation Agreements are critical steps for South Africans moving abroad. Prompt notification helps manage your tax obligations, while DTAs ensure you do not face the burden of double taxation. With the help of Ibex Consulting, you can navigate the complexities of international tax laws and optimise your financial situation.