Understanding how tax works across countries can be confusing, especially if you earn income from more than one place or are living abroad. One of the key documents you might need as a South African taxpayer is a Tax Residency Certificate (TRC). This certificate helps you prove to another country that you are a tax resident of South Africa, and it can help you avoid being taxed twice on the same income. If you are working overseas, receiving pension payments from abroad, or doing business with foreign companies, having a TRC can make dealing with international tax matters easier and more straightforward.
Key Takeaways
- Proof of South African Tax Residency: A Tax Residency Certificate (TRC) confirms that you are recognised as a tax resident of South Africa and is used to claim tax relief in other countries under Double Taxation Agreements (DTAs).
- Residency Status Determines Tax Obligations: SARS uses the ordinary residence test or the physical presence test to decide if you are a tax resident, which affects whether you are taxed on your worldwide income or only on income earned in South Africa.
- TRC for Year of Departure Now Required: SARS may request a TRC specifically for the year you left South Africa to verify when your tax residency ended, and without it, you may still be treated as a tax resident and owe back taxes.
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What Does Being a Tax Resident in South Africa Mean?
If you are classified as a South African tax resident, you are legally required to pay tax on your entire income, which includes both local earnings and income from abroad.
Even if you are currently living in a foreign country, you may still be regarded as a South African tax resident if you spend a considerable number of days within South Africa, or if you have strong ties to the country—such as owning property, maintaining financial interests, or having close family members who live there.
It is necessary to confirm your tax residency status to ensure that all your income is correctly declared to SARS. Failing to do so may result in avoidable penalties and interest charges being added to any outstanding tax.
Understanding your tax residency is important, but it’s equally crucial to grasp how your income is reported to SARS through an IRP5. If you’re living abroad or earning in SA, don’t miss our guide on What is an IRP5? to see how it affects your tax returns.
Ordinary Residence Test
A person is treated as a South African tax resident if they are classed as being ordinarily resident in the country. This refers to someone who has a fixed and settled home in South Africa and who returns to this home regularly, indicating a clear intention to live in South Africa permanently or for the foreseeable future. The determination is not based on a single factor but rather on a combination of circumstances. These may include:
- How long the person stays in South Africa each year
- The reason they are living in the country
- Their personal and economic ties, such as where their family lives, where they work, and where their business or financial interests are held
This test relies on subjective elements and is assessed on a case-by-case basis by looking at the full picture of a person’s life and intentions. It focuses on where someone sees their true home to be, rather than simply where they are located at a particular point in time.
Physical Presence Test
If someone does not meet the requirements of the ordinary residence test, SARS may assess tax residency based on the physical presence test, which is based on the number of days spent in South Africa. Under this method, a person will be treated as a tax resident if they satisfy all of the following conditions:
- They were physically present in South Africa for at least 91 days during the current tax year
- They were present in the country for a minimum of 91 days in each of the five years directly before the current year
- They spent a total of 915 days or more in South Africa over those five prior years
This test is used when a person does not necessarily consider South Africa to be their main home but still spends a substantial amount of time in the country. It offers a more objective standard that focuses solely on physical presence, without taking personal intentions or emotional connections into account. If the person leaves South Africa and stays outside the country for more than 330 full days in a row, they will usually be seen as no longer tax resident from the day they left.
For individuals who frequently send money abroad, maintaining accurate documentation through a Tax Residency Certificate becomes essential.
Implications of Tax Residency
As a tax resident, you’re taxed on your global income. This includes salaries and wages, business income, investment returns, rental income, and pensions and annuities.
Even if you earn income abroad, it’s subject to South African tax laws. However, you may be eligible for foreign tax credits or exemptions under Double Taxation Agreements (DTAs) that South Africa has with other countries.
Non-Resident Taxation
If you’re not a tax resident, you’re only taxed on income sourced within South Africa. This includes:
- Income from employment or services rendered in South Africa
- Rental income from property located in South Africa
- Interest from South African sources
- Capital gains from the disposal of South African assets
Non-residents are not taxed on their foreign income.
What Is a Tax Residency Certificate (TRC)?
A Tax Residency Certificate (TRC) is an official document issued by the South African Revenue Service (SARS). It serves to confirm that an individual or entity is considered a tax resident of South Africa for a specified period.
This certificate is primarily used when dealing with tax matters involving foreign jurisdictions. Specifically, it is presented to foreign tax authorities to claim benefits under Double Taxation Agreements (DTAs) that South Africa has with other countries. These agreements are designed to prevent the same income from being taxed in both South Africa and another country.
To obtain a TRC, one must apply to SARS, providing necessary documentation to substantiate their tax residency status. This process ensures that the individual or entity is recognised as a South African tax resident, thereby enabling them to claim relief from double taxation in accordance with the relevant DTA.
Why Does SARS Request a TRC?
The South African Revenue Service (SARS) may request a Tax Residency Certificate (TRC) when a person applies to end their tax residency in South Africa. This request forms part of SARS’ process to confirm that the individual has officially become a tax resident in another country. It helps SARS confirm that the person is not simply declaring non-residency in South Africa without taking on any tax responsibilities elsewhere.
SARS is mainly trying to prevent what is known as double non-taxation. This happens when someone tries to leave the South African tax system but is also not taxed in another country. By asking for a TRC, SARS is able to check that the individual is recognised as a taxpayer in a different country, which aligns with international tax rules and existing Double Taxation Agreements (DTAs).
How to Apply for a Tax Residency Certificate (TRC)
Choose the Right Form
Start by selecting the correct form for your situation. If you are an individual applying for a Tax Residency Certificate, you must complete the RC01 form. If you are applying on behalf of a company, trust, or another legal entity, the RC02 form is required. These forms are available on the SARS website.
Prepare Your Supporting Documents
Once you have completed the correct form, gather your supporting documents. You will need a certified copy of your South African ID or passport and proof that you live in South Africa, such as a lease agreement or a recent municipal bill. Make sure all documents are clear and not expired.
Submit Your Application
You can submit your completed form and documents either by visiting a SARS branch in person or by email. If you choose to visit a branch, you should book an appointment beforehand. If you prefer email, scan your documents and send them to the SARS address provided on their website, ensuring that everything is readable and in PDF format.
Wait for Processing
After submitting your application, SARS will take around 21 working days to process it, provided all documents are correct and complete. If something is missing or unclear, they will contact you to request additional information, which may delay the process.
Receive Your TRC
If your application is successful, SARS will issue your Tax Residency Certificate. You can then use this certificate to prove to foreign tax authorities, banks, or other institutions that you are a tax resident of South Africa.
Why Is SARS Requesting a TRC for the Year of Departure?
SARS has recently begun asking taxpayers to submit a Tax Residency Certificate (TRC) specifically covering the year they left South Africa, which has made the exit process more involved than before. Many individuals who ended their tax residency several years ago did not obtain a TRC at the time, either because they did not know it was necessary, or because the country they moved to does not issue TRCs with retrospective effect.
This change appears to be driven by several factors:
- Confirming the Correct Date of Tax Residency Change: SARS is looking to confirm that a person became a tax resident in another country at the time they left South Africa, and not months or years later. This is especially relevant in situations where someone spent time between countries or was not clearly tax resident anywhere during the transition. By checking for a TRC dated to the year of departure, SARS can assess whether residency was properly transferred to a new jurisdiction.
- Reinforcing Evidence of Non-Residency: If a TRC for the departure year cannot be supplied, SARS may challenge the original declaration of non-residency. Their position could be that the individual continued to be a tax resident of South Africa, and therefore remained liable for tax. This may lead to reassessments and backdated tax obligations, including penalties, for the years in question.
- Preventing Gaps in Tax Responsibility: SARS appears to be tightening controls to stop individuals from declaring themselves non-resident in South Africa while not being tax resident anywhere else. This stricter approach is aimed at reducing the chances of people escaping tax altogether by using the change of residency as a tax avoidance method.
Conclusion
A Tax Residency Certificate (TRC) plays a key role in managing your international tax affairs as a South African. It provides official confirmation of your tax residency status, which is necessary when claiming relief under Double Taxation Agreements and when ending your tax residency in South Africa. Whether you are working abroad, investing internationally, or emigrating permanently, having a TRC helps avoid tax issues and ensures your status is clear to SARS and to foreign tax authorities. Understanding how to apply, when it is needed, and the consequences of not having one is essential for staying compliant and avoiding unexpected penalties.
Frequently Asked Questions
What is the purpose of a Tax Residency Certificate (TRC)?
A TRC confirms that you are a tax resident of South Africa and is used to claim relief from double taxation when dealing with foreign tax authorities.
Who needs to apply for a TRC?
Any South African taxpayer earning income overseas or dealing with foreign tax authorities may need a TRC, especially when claiming treaty benefits or ending tax residency.
How long does it take to get a TRC from SARS?
SARS usually takes about 21 working days to process a TRC application, as long as all documents are submitted correctly and your tax affairs are in order.
What happens if I don’t have a TRC for the year I left South Africa?
Without a TRC for your departure year, SARS may continue to treat you as a South African tax resident, which could result in backdated tax assessments and penalties.
Can I apply for a TRC online?
While SARS does not currently offer full online submission, you can email your completed forms and documents to SARS or visit a branch with an appointment.
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