Sars sharpens expat tax scrutiny: Here’s what to do

South Africans coming home after working abroad, beware. If you surrendered your tax resident status believing you would never come back, the South African Revenue Service (Sars) is watching you more closely than ever.

The revenue authority has tightened its oversight of expatriate tax residency and introduced new measures that could leave returning South Africans exposed to backdated tax claims. Those emigrating with plans to return should also take note of this.

A word of caution for South Africans living abroad: if you haven’t formally ceased tax residency through tax emigration or a double tax agreement – and Sars hasn’t accepted your declaration – you’re still considered a tax resident and liable for tax on your worldwide income.

With the government counting on Sars to boost revenue collection to plug a widening budget deficit, the agency has received additional funding from the National Treasury to strengthen enforcement and compliance.

Since June 30, Sars has updated its official notice of non-resident tax status to include not just the date a person ceased to be a South African tax resident, but also the legal basis for that change.

In parallel, Sars has introduced a formal mechanism to declare the reinstatement of South African tax residency. This means that anyone returning to South Africa after a period of non-residency must now inform Sars, specifying the effective date of their return, via the RAV01 form on eFiling.

These small but significant additions carry major tax implications.

“If you’ve left South Africa and consider yourself a non-resident, confirm your status with Sars. If you’re returning and will reinstate residency, plan ahead and speak to a tax professional,” Thomas Lobban, director at Ibex Consulting, a division of Latita Africa, tells Currency. “Tax planning is always best done in advance.”

Tracking tax residency

Lobban explains that Sars is increasingly scrutinising the legal basis used to cease tax residency. The options include proving that South Africa is no longer your permanent home (ordinarily resident test), that you’ve been physically absent for long enough (physical presence test), or that a double tax agreement covers you. Each pathway has specific implications for tax reporting and compliance.

For expats using the double taxation agreement route, the burden of proof is higher. These individuals must be able to substantiate their non-resident status each year. In each case, those who formally ceased residency only declare South African-sourced income.

Sars’s updated RAV01 form enables it to track when a taxpayer resumes tax residency. This closes a loophole that previously allowed returning expats to avoid scrutiny simply because Sars wasn’t formally notified of their return.

Failing to follow the formal process can have serious consequences.

“You put yourself in a position where the cards are heavily stacked in Sars’s favour,” Lobban says.

According to Leap Group, a tax advisory firm, if you have not ceased tax residency, you cannot simply “reinstate” it upon return. Sars will have no record that you were ever a non-resident and can:

• Treat your entire absence period as continued residency.
• Issue backdated assessments for foreign income earned while abroad.
• Impose penalties and interest for non-disclosure.

The changes are part of a broader push by Sars to modernise systems and crack down on non-compliance. Sars has long lacked a formal tracking mechanism to monitor when taxpayers resume South African tax residency. The latest enhancements are meant to close that gap and ensure the fiscus captures the appropriate tax base.

A wake-up call for expats

The key message is that tax residency is no longer a vague status based on geography or intent. It is a legal designation accompanied by corresponding paperwork. Failing to follow the proper procedure can result in Sars treating an expat as a tax resident by default, thereby exposing them to tax on their global income.

With the changes now in force, the onus is firmly on taxpayers – not Sars – to maintain and update their residency records.

“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,” says Tax Consulting South Africa. “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.”

Expats with offshore trusts, investments or assets should structure their affairs before returning to South Africa. Reinstating tax residency is a legally significant event, and Sars will examine the intention behind it, as well as the supporting evidence.

With the 2025 tax season under way, the message is clear: non-residency is no longer a grey area. And if you’re planning a return to South Africa, your tax obligations may begin long before your plane even takes off.

_{Top image: Rawpixel / Currency collage.}