Sars increases scrutiny on South African expatriates' tax residency

South African expatriates living and working abroad are firmly in the Tax Man’s sights.

Recent enhancements indicate the South African Revenue Service (Sars) is increasing its focus on the importance of expatriates legally confirming the basis on which they cease their tax residency status in South Africa to benefit from a reduced income tax liability as non-resident taxpayers.

With the 2025 Tax Filing Season fast approaching, Sars has introduced important changes to monitor the accuracy of taxpayers’ filing positions in line with their South African residency status.

As of June 30, 2025, the Sars issued Notice of Non-Resident Tax Status confirmation letter now also explicitly states the qualifying basis under which tax residency has ceased. Previously, this was not reflected in the letter, which serves as confirmation that Sars’ records via eFiling reflect an individual as having updated their tax residency status from a ‘Normal’ to ‘Non-resident’ taxpayer in South Africa. This can be seen as Sars tightening the potential leakage of collecting revenue on expatriates’ foreign-sourced income.

Why it matters

The qualifying basis of being recorded as a ‘Non-resident’ taxpayer in South Africa is important because it has a direct bearing on how foreign-sourced income is to be declared in one’s future tax filing obligations. Both non-residents who cease their ‘Normal’ resident taxpayer status with Sars under the Financial Emigration or Double Tax Agreement process must file annual tax returns. A significant difference is that only expatriates who receive a Notice of Non-Resident Tax Status confirmation letter with the qualifying basis of a Double Tax Agreement need to fully disclose their foreign-sourced income to Sars.

·        Permanent non-resident taxpayers who followed the Financial Emigration route:

For South Africans who followed this formal process through Sars, cessation was qualified on the basis of leaving South Africa with no intention to return permanently. These non-resident taxpayers are not obligated to notify Sars annually of their non-resident status. Furthermore, they have the beneficial filing position to only declare South African-sourced income (e.g., rental income) for tax purposes, but not foreign-sourced income.

·        Temporary non-residents (under Double Tax Agreements):

Those who live and work abroad for shorter periods of time can rely on Double Tax Agreements (DTAs) between South Africa and the host country to temporarily cease tax residency. The provisions of the DTA ensure the taxpayer is not taxed twice on the same foreign-sourced income.

Unlike non-resident taxpayers who financially emigrated, South African expats qualifying for cessation on this basis must motivate to Sars every tax year why they are eligible to claim DTA relief as a non-resident. This is consistent with South African and international tax law. These individuals must declare all local and foreign-sourced income to Sars, although they benefit from the protection under a DTA that foreign-sourced income is non-taxable.

Sars is working to prevent misuse of non-residency claims, especially where individuals may deliberately attempt to avoid their legal tax obligations by requesting the revenue authority to verify and confirm a non-resident status under the incorrect qualifying basis. Choosing wisely how expatriates go about requesting their non-resident status from Sars is now more important than ever. This is particularly true in that taxpayers’ relevant supporting documents may remain on Sars’ records long after their Notice of Non-Resident Tax Status confirmation letter has been issued.

Sars focuses on the details

The examples below show how Sars now includes reference to the qualifying basis on which outbound expatriates have ceased their RSA tax residency via eFiling – whether through the Ordinarily Resident Test or the DTA, in line with section 1 of the Income Tax Act.

Previously, the effective date of cessation remained the primary focus in the Non-Resident Tax Status confirmation letter.

By recording the basis of cessation, Sars improves its ability to track the legal justification behind a taxpayer’s exit from the tax net. This is no minor administrative update. It signals a more transparent and potentially more enforceable approach by Sars in monitoring tax residency and future tax compliance.

New tracking of residency changes

Sars also recently enhanced its record-keeping of taxpayers’ tax residency status. This enables the tax authority to monitor the re-entry into South Africa by those taxpayers who previously ceased tax residency.

The new verification step appears to be for purposes of recording the taxpayer’s future tax filing position with the reinstated date on the “Reinstatement Date of RSA Tax Residency” line item on the RAV01-form. Previously, Sars' verification process was limited to when taxpayers ceased to be South African tax residents only.

The life cycle of one’s non-residency status now has a definitive start and end date.

Ceasing tax residency: the correct process still applies

Despite these changes, the requirements to formally cease tax residency remain the same.

Failing to follow this formal process may result in Sars continuing to treat the individual as a tax resident, making them liable for paying tax on their worldwide income.

A warning to the non-compliant

This is part of a wider trend by Sars to modernise its systems, increase efficiency, and close non-compliance gaps.

The new level of transparency should serve as a wake-up call to taxpayers who have assumed that physical emigration or prolonged absence from South Africa alone is sufficient to cease tax residency. Through the more enhanced confirmation letter, Sars is emphasising that cessation is a formal legal process, not an automatic consequence of leaving the country.

Final thought: get it right the first time

With the financial and compliance risks involved, South African expatriates should consult qualified tax professionals experienced in cross-border taxation. Applying the correct legal test and maintaining accurate records can mean the difference between peace of mind and a skilled Sars auditor taking a very close look at your tax compliance status.

As Sars continues to raise the bar on compliance, taxpayers must keep pace. When it comes to ceasing tax residency, clarity, formality, and accuracy are the non-negotiables.

* Abdoll is the legal manager of cross-border taxation, and Bornman is the expatriate tax attorney at Tax Consulting South Africa.

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