The Cost of Poor Tax Advice: SARS Non-Resident Rejections on the Rise

For South Africans leaving the country, either permanently or for extended periods, securing non-resident tax status is essential for managing their tax obligations efficiently. However, an increasing number of these individuals are finding their applications rejected by the South African Revenue Service (SARS), resulting in significant tax implications.

While some rejections arise from strict compliance measures, many stem from errors made by tax practitioners who lack experience in handling these complex applications. The process is far from straightforward, and a single mistake can lead to delays, penalties, or outright rejection.

The importance of having your tax status accurately reflected with SARS has increased following recent updates to the tax directive system, effective from 11 April 2025. These changes will affect South Africans who have already emigrated or are in the process of cutting tax ties.

SARS announced the system will no longer accept any tax directive application for the withdrawal of retirement interest submitted on or after 1 September 2024 for the reason “Emigration Withdrawal” as it was replaced by the system of Cessation of South African Residence on 1 March 2022.

Obtaining the SARS Non-Resident Tax Status Confirmation Letter, formally acknowledging a taxpayer has ceased to be a tax resident of South Africa, is key.  But before applying for the letter, a taxpayer must ensure they are tax compliant at SARS with no outstanding returns, no unpaid taxes and no tax debt.

There is no better time than now to finalise your non-residency tax status by using the online Virtual Emigration process. It is an easy step-by-step process to secure SARS issues your Non-Resident Tax Status Confirmation Letter without costing an arm and a leg.

Unfortunately, many taxpayers are placing their trust in tax practitioners who are either unfamiliar with cross-border taxation regulations or fail to conduct proper due diligence.

Our Virtual Emigration team of specialists is committed to providing expert service and pay attention to every detail, so you the taxpayer, meet the criteria for ceasing tax residency.

Understanding the SARS Non-Resident Application Process

The process of obtaining non-resident tax status with SARS requires substantial proof that the applicant has ceased tax residency in South Africa. This typically includes:

• Demonstrating that the applicant has left South Africa permanently or for an extended period.
• Providing evidence of tax residency in another country.
• Supporting documentation such as foreign employment contracts, rental agreements, and utility bills.
• Meeting the ‘ordinarily resident’ and ‘physical presence’ tests set by SARS.

The Role of Inexperienced Tax Practitioners in Non-Resident Rejections

Several factors contribute to the growing number of rejected applications:

1. Lack of Expertise – Not all tax practitioners specialize in expatriate taxation. Many assume that a standard tax approach applies, leading to critical mistakes.
2. Failure to Provide Proper Documentation – SARS is stringent in its requirements, and missing documents often result in automatic rejection.
3. Misinterpretation of Residency Rules – Tax residency is determined based on multiple factors, not just physical presence. Some practitioners fail to grasp the nuances of the tests applied by SARS.
4. Inadequate Communication with Clients – Many taxpayers do not understand the complexity of the process, and some practitioners fail to guide them through the necessary steps properly.
5. Relying on Outdated Information – Tax laws and SARS regulations evolve, and failure to stay updated can lead to applications being processed using outdated criteria.

Consequences of a Rejected Application

A rejected non-resident application has far-reaching consequences for expatriates and foreign investors. These include:

• Double Taxation Risks – Without an approved non-resident status, taxpayers may be liable for tax in both South Africa and their new country of residence.
• Penalties and Interest Accumulation – SARS may still expect tax payments on worldwide income if the taxpayer is classified as a resident.
• Delays in Financial Planning – Unresolved tax residency issues can complicate estate planning, investments, and access to retirement funds.

Conclusion

The rise in SARS non-resident rejections is a growing concern for expatriates and tax professionals alike. While SARS has tightened its scrutiny, a significant portion of these rejections can be traced back to inexperience and mismanagement by tax practitioners who are not fully equipped to handle such complex cases. To avoid unnecessary delays, financial losses, and compliance risks, taxpayers must be vigilant in selecting their tax advisors and ensure their applications are handled with precision and expertise.