Understanding the 2025 Tax Directive Changes for Non-Residents who Receive Pensions or Annuities
/The South African Revenue Service (SARS) has introduced several significant changes to the tax directive system, forms, guides, and standard operating procedures. These updates are designed to streamline processes, enhance compliance, and incorporate the latest legislative changes. Here’s a comprehensive overview of what you need to know, specifically focusing on pensions and annuities received by non-tax residents.
One of the most notable changes is the automation of the application process for requesting relief from South African tax under Double Taxation Agreements (DTA) for pensions and/or annuities.
This means that you can now submit your applications via eFiling, making the process more efficient and reducing the need for manual interventions. SARS aims to evaluate these applications within 21 working days.
This form is used for requesting relief from South African tax on pensions and/or annuities payable from a South African Retirement Fund. The updated form ensures that the pensions and/or annuities will not be subject to tax in South Africa under the applicable DTA.
Read more here >> Relief From South African Tax for Pension and Annuity Income | South African Revenue Service
Impact on Non-Residents
Non-residents who require a DTA to be considered on the taxation of a Savings Withdrawal Benefit can now include this in their applications. Additionally, the system will no longer accept tax directive applications for the reason "Emigration Withdrawal" as it has been replaced by the "Cessation of South African Residence" process.
Example: How These Changes Help a Retired Non-Resident
Consider the case of Mr. John Smith, an 81-year-old retiree now living in the UK. Mr. Smith is a non-resident in South Africa but receives an annuity income from South Africa as well as a pension income. As a tax resident in the UK, he is required to file a tax return in the UK declaring his worldwide income. However, his pensions and annuities are still being taxed in South Africa, necessitating the filing of a South African tax return.
How the Changes Help Mr. Smith:
Automated Relief Application: Mr. Smith can now apply for relief from South African tax on his pensions and annuities under the DTA between the UK and South Africa through the automated eFiling system. This simplifies the process and ensures timely evaluation.
Double Taxation Agreement (DTA): According to Article 17 of the DTA between the UK and South Africa, pensions and annuities paid to a resident of either country are taxable only in the country of residence. This means that Mr. Smith's pensions and annuities should be taxed only in the UK, not in South Africa. By applying for relief under the DTA, Mr. Smith can avoid double taxation and ensure compliance with both countries' tax laws.
Steps for Mr. Smith:
1. Submit RST01 Form: Mr. Smith should submit the RST01 form via eFiling to request relief from South African tax on his pensions and annuities.
2. Provide Proof of UK Residency: He needs to provide proof of his tax residency in the UK to SARS.
Acceptable proof includes:
Certificate of Residence (CoR): Issued by HM Revenue & Customs (HMRC), this certificate confirms that Mr. Smith is a tax resident in the UK.
Tax Returns: Copies of UK tax returns filed with HMRC.
Utility Bills or Bank Statements: Showing Mr. Smith's UK address.
UK Residency Visa or Permit: If applicable.
3. Claim Relief: Once approved, Mr. Smith's pensions and annuities will be taxed only in the UK, in accordance with the DTA.
These changes are designed to make the tax directive application process more efficient and ensure that it aligns with the latest legislative updates. As your trusted accountant, I am here to help you navigate these changes and ensure that your tax affairs are in order.
If you have any questions or need assistance with your tax directive applications, please do not hesitate to contact me. Staying informed and proactive is key to managing your tax obligations effectively.
