Expat South Africans now need to prove they’ve been tax resident outside of South Africa for three consecutive years as part of the process of accessing and withdrawing their retirement funds from the country. Here's a guide on how you can provide this proof.
If you want to move your retirement annuity (RA) out of South Africa, you will now need to follow a tax compliance process with SARS. This is a two-step process:
Step 1: You must notify SARS that you are no longer tax resident in South Africa (also known as tax emigration) and you will need to either do this yourself or with the aid of a tax practitioner as there can be capital gains implications.
Step 2: You have to prove to the investment company (where your RA is invested) that you have been tax resident in another jurisdiction for three consecutive tax years.
You do not need to reside in a single country for that period of time, so long as you can show that you haven’t been tax resident in South Africa. One of the big challenges we envisage in this process is proving tax residence in another jurisdiction (or jurisdictions) for three consecutive years.
The most common method of proving your tax residency is with a tax residence certificate. If your new country has a Double Taxation Agreement (DTA) with South Africa, the tax authority will be able to issue this certificate.
A Tax Residence Certificate
A Tax Residence Certificate (TRC) is an official document issued by a tax authority that certifies you are tax resident in that country. They’re necessary because of the tax treaty agreements between countries that determine where residents get taxed and, in many cases, protect them from being taxed twice on the same income in different jurisdictions.
We have researched and established how our clients can obtain proof of tax residency in four common countries that our clients emigrate to:
- How to apply for a tax residence certificate in the UK
- How to apply for a tax residence certificate in Australia
- How to apply for a tax residence certificate in the USA
- How to apply for a tax residence certificate in New Zealand
- How to apply for a tax residence certificate in other countries
- Other ways to prove you're not tax resident in South Africa
How to apply for a tax residence certificate in the UK
In the UK, the tax residence certificate or Certificate of Residence (CoR) is only used when it comes to claiming tax relief under DTAs. For the purpose of proving your residence so that you can withdraw your retirement annuity, you will need something called a “letter of confirmation”.
There are two ways to apply.
1. Complete the Certificate of Residence form on HMRC.
Even though this form is not intended for letters of confirmation, it includes a field where you must provide a reason you need the certificate. HMRC will consider this reason and then likely choose to provide a letter of confirmation.
The benefit of using this form is that you can complete the application online. However, you will need to provide more information than going the alternative route. Be sure to fill in these specific fields as follows:
- Reason why a certificate is needed: South African law requires that you prove you have been tax resident outside of South Africa for three consecutive years before you can withdraw your retirement annuity and you wish to withdraw your RA
- Period for which you need a certificate: From the date you entered the UK to the current day. Or at least a period covering the past three years.
- Article of the DTA: Article 17
2. Mail a request to HMRC
The requirements for a letter of confirmation aren’t as stringent as a CoR as you do not need to prove you’re entitled to benefits. HMRC can use your Self Assessment tax history to confirm how long you have been resident in the UK.
You must write to HMRC to request a letter of confirmation of residence and include your name, telephone number and NI number. The address is:
Pay As You Earn and Self Assessment
HM Revenue and Customs
You should also include in your request:
- Why you need the letter of confirmation: South African law requires that you prove you have been tax resident outside of South Africa for three years before you can withdraw your retirement annuity and you wish to withdraw your RA
- The period you need the letter to cover: From the date you arrived in the UK or the past three years
- If you have not filled in a Self Assessment tax return, you may need to provide a breakdown of the number of days you’ve spent in the UK so that HMRC can perform the Statutory Residence Test.
How to apply for a tax residence certificate in Australia
You can request a certificate of residency from the Australian Taxation Office by sending a letter with this cover sheet. Your request should include:
- Your full name, date of birth and address
- Your tax number (TFN)
- The country the certificate is for
- A statement that you’re tax resident in Australia
- The period the certificate is required for: Note: this can’t be greater than a year from the date of issue.
- Signature and date
You can fax your letter to 1300 730 298 or mail the letter to:
Australian Taxation Office
PO Box 3006
PENRITH NSW 2740
How to apply for a tax residence certificate in the USA
The Internal Revenue Service requests that you complete this form to apply for US residency certification. Please note, the USA does charge an administration fee (currently $85) for issuing residence certification. The fee can be paid by cheque, money order or electronic payment and confirmation of payment must be sent with the form.
The IRS provides a comprehensive guide to exactly how to fill in the form.
How to apply for a tax residence certificate in New Zealand
New Zealand’s Inland Revenue allows you to apply for your tax residency certificate online by sending a message with “certificate of residency” in the subject line on myIR. Include the following information:
- Full name, address and date of birth
- IRD number
- The country or territory the certificate is for (South Africa)
- A statement saying whether you're only a tax resident of New Zealand or a dual resident under the relevant tax treaty
- The period the certificate is required for and, if for more than a year, an explanation (three years, explain that this is required by the South African government in order for you to access your RA)
- The number of certificates needed: 1
How to apply for a tax residence certificate in other countries
Information on how to apply for a tax residence certificate will be available on the website of the country’s tax authority.
Something to bear in mind is that if your tax certificate is not in English, you will need to get it translated before it can serve as proof.
Other ways to prove you’re not tax resident in South Africa
While the Tax Residence Certificate is the most common way to prove your tax residency, there are some circumstances where you may be unable to obtain one (for example, if your country doesn’t have a DTA with South Africa). In those cases, you can also use:
- Tax returns or assessments from your new country of residence
- Proof of a foreign address. Possibly a recent proof, plus one from three years ago
- Immigration documents such as a certificate of citizenship, a passport, a work permit or a visa
- A letter from an employer in your new country, confirming your date of employment. If you’re self-employed or own your own business, a letter from your tax practitioner confirming the dates you’ve run your business.
If you would like help with withdrawing and transferring your South African retirement annuities offshore, get in touch with us at firstname.lastname@example.org or give one of our advisers a call on +27 (0) 21 657 2133 if you have any questions.
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