What is the ordinarily resident test from SARS?
South Africa has a residence-based tax system, and therefore, as a South African who lives or plans to live abroad, you need to determine if you must pay tax in South Africa. A resident is defined by the Income Tax Act, and the South African Revenue Service (SARS) uses two separate tests to determine whether a natural person is a tax resident in South Africa under South African common law. These tests are the ordinarily resident test, conducted first to determine residency, and only if the answer is negative, the physical presence test.
The ordinarily resident test is a subjective test because there is not one single fact that decides this, but a balance of circumstances. It is, therefore, not possible to lay down any clearly defined rule or period to determine ordinarily residence. You are generally deemed ‘ordinarily resident’ in South Africa, if South Africa is the country to which you will naturally return to after your wanderings. It could be described as your usual or principal residence, or your ‘real’ home. This means that a natural person may be resident in South Africa, even if that person was not physically present in South Africa during the relevant year of assessment. The decision whether the taxpayer is still ordinarily resident is thus based on the current purpose, nature and intention of the taxpayer’s absence, and the circumstances to support this.
Some of the determining factors are:
- the place where you and your family stay most often – where you have a life,
- the place where you conduct your business and personal interests,
- your status in South Africa and in other countries, for example, whether you are an immigrant and what the work permit periods and conditions are,
- where your personal belongings are stored,
- your nationality,
- your family and social relations (for example, schools, places of worship and membership at sports or social clubs),
- your political, cultural or other activities,
- any application you make for permanent residence or citizenship, and the periods you spend abroad, the purpose and nature of those visits, and the frequency of those visits.