“We have seen this often and especially in unassisted non-resident applications that are rejected for reasons that are both contradictory and inconsistent,” says Thomas Lobban, Head of Cross-Border Individual Tax at Tax Consulting South Africa.
However, approval is still possible for such rejected applications if the taxpayer follows the correct processes and fully complies with all legal requirements. The taxpayer can, where appropriate, request that SARS review its decision and carry the application forward on the correct basis.
The stalemate
Lobban warns that taxpayers applying to be non-residents for tax purposes will need to be prepared for an increasingly likely first-time rejection but must be diligent in pursuing approval. “SARS cannot delay or reject a matter without good and lawful cause where you are compliant and qualify to cease your tax residency. With evidence, due diligence, and enough competence, one can outmanoeuvre an errant SARS official and avoid an absurd stalemate situation,” he says.
In chess terms, a stalemate is a situation where a player is not in check and has no legal move. According to Lobban, this seems to be the situation being played out with an increasing number of non-resident applications. Even where there is no legal reason for SARS to reject an application, it still happens.
“Examples that we have seen include rejections on the basis of requested information not being submitted even when it was, or a rejection on the basis of a deadline that has not yet passed, among many others” says Lobban.
What should taxpayers do to succeed?
If SARS is indeed on a mission to find a reason to stall or reject a taxpayer’s efforts to cease tax residency, as unlikely as this should be, then emigrating South Africans should minimise those reasons as far as possible.
Says, Victoria Lancefield, the firm’s Director of Expatriate Tax and Banking Engagement: “Ceasing tax residency is a fairly tight process with only 21 days to prepare, reconcile and submit the often substantial body of documents SARS requests.” How much evidence SARS requires will depend on the complexity of the taxpayer’s financial matters and tax affairs.
Those ceasing tax residency should take extra care in the following areas:
Going for checkmate
SARS will inevitably carry out some form of verification process on a taxpayer ceasing their South African tax residency, based on their submitted information, and could well reject an application for the slightest perceived shortcoming.
“It is certainly understandable as this is a complex process involving legal and financial components. However, inconsistent and unreasoned rejections are making it extremely difficult for taxpayers to follow the process in an efficient timely manner.” says Lancefield. “We have noticed a trend of what could be seen as delay-by-rejection tactics being employed in certain cases, so we are advising those ceasing tax residency to be extra diligent and thorough when applying.”
By playing with the intent to win, taxpayers can overcome this latest hurdle.
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