As a taxpayer, you may think that once you cease to be a tax resident in South Africa (commonly known as Financial Emigration), there are no further compliance requirements that you need to meet. However, that is no longer the case. The South African Revenue Service (SARS) now requires all individuals who have ceased their tax residency in South Africa to obtain a Notice of Non-Tax Residency Status Confirmation Letter and realign their non-residency status with SARS.

This step may seem unnecessary or burdensome, but it is now compulsory, and failing to obtain this letter can result in serious consequences for your tax compliance. Therefore, it is crucial that you understand the importance of obtaining this letter and ensure that you comply with this new requirement.

Expats express their concerns  

During a webinar on The SARS Non-Res Letter, hosted by Tax Consulting SA (TCSA) - aimed to address the many concerns taxpayers face when seeking to obtain this non-res letter as well as understanding its purpose - expats became quite vocal on their plights and concerns. 

An underlying concern around most questions from expats who have already financially emigrated, were aimed at how to obtain a notice of non-tax residency confirmation letter and the timelines in obtaining the letter. Several other attendees commented on the many delays and obstacles they faced when trying to obtain this letter. Another common question asked by expats was how to check if they are non-resident with SARS. 

There are clearly many misconceptions and lack of knowledge around this letter, which have left expats perplexed.

Non-Tax Residency Confirmation Letter

Understanding the Notice of Non-Tax Residency Status Confirmation Letter

Simply, the notice of non-tax residency confirmation letter is a document issued by SARS to confirm that a taxpayer has changed their status from tax resident to a non-resident.This notice is unique as it provides the specific date on which you ceased to be a tax resident of South Africa.

This document is important for non-resident taxpayers as it serves as your first line of defense against any future tax liability on your foreign sourced income. As SARS has increased its focus on offshore holdings and introduced aggressive collection measures, this notice becomes your “shield and armor” should SARS make any inquiry into your tax residency. 

What does this mean for South Africans who have already undergone the process of Financial Emigration?

Prior to the introduction of this new process, the confirmation of cessation of tax residency was typically done through the completion of the MP336(b) and issuance of the Emigration Tax Clearance Certificate (ETCC) documents. However, the Notice of Non-Tax Residency Status Confirmation Letter is now a separate SARS initiative and process that is used as a confirmation that an individual has indeed ceased to be a tax resident of South Africa.

The impact of this new process on taxpayers who had previously gone through the process of ceasing their tax residency in South Africa is two-fold. On the one hand, it provides an additional level of certainty and confirmation that their tax residency status has been properly dealt with and recorded by SARS. 

On the other hand, the introduction of this new process also means that individuals who have previously ceased their tax residency in South Africa will now be required to undergo an additional process, by obtaining the Notice of Non-Tax Residency Status Confirmation Letter in order to align their non-residency status.

Non-compliance will be costly 

The requirement for a Notice of Non-Tax Residency Status Confirmation Letter is a recent development in South African tax law. SARS implemented this additional step in early 2022, and many taxpayers may have overlooked it at the time, seeing it as just an additional confirmation.

However, during the 2022 annual filing season, significant changes were made to the process of submitting non-resident tax returns. In particular, the non-resident tick box was greyed out, causing much confusion among taxpayers who were unsure how to proceed.

This change highlighted the importance of the Non-Tax Residency Status Confirmation Letter, as it is now a critical component in demonstrating your non-resident status to SARS and no longer serves as a mere formality. Without this letter, you may face significant challenges in completing your tax returns and demonstrating your compliance with South African tax laws. This letter will not only help you avoid any penalties or fines but also ensure that your tax affairs are in order and that you can proceed with confidence in your dealings with SARS.

Another scary trend has been the influx of expatriates approaching Financial Emigration regarding SARS enquiries, large tax liabilities incorrectly owed to SARS, and penalties and interests incorrectly allocated, due to the non- resident taxpayer’s status not being adequately confirmed with SARS. 

Don’t become a statistic

The requirement for a Notice of Non-Tax Residency Status Confirmation Letter is a new development that has caught many taxpayers off guard. Financial Emigration has seen a lot of confusion and uncertainty among taxpayers who are unsure of how to comply with this requirement and what consequences they may face for failing to do so.

If you are unsure about your non-residency status or have any questions about the Notice of Non-Tax Residency Status Confirmation Letter, it is best to seek professional advice, which will save you the costly burden of remedying your non-compliance in the future. 

Written by Nikolas Skafidas, SARS Tax Compliance and Process Supervisor; and Roxanne Naidoo, Admitted Attorney – Global Partner & Client Engagement; Tax Consulting SA