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BPR 153 - Residency Status of a Non-Resident Who Applies For a Temporary Residence Permit - Layman Version

First, it’s important to understand the scope of this specific ruling. While your ultimate goal includes “South Africans working abroad,” BPR 153 does not deal with that scenario. Instead, it specifically addresses the tax residency status for non-residents who are considering moving to South Africa on a temporary retirement permit.

 

Understanding South African Tax Residency: A Guide to Binding Private Ruling (BPR) 153

    • This information is based on Binding Private Ruling (BPR) 153, issued by the South African Revenue Service (SARS) on 30 August 2013. This ruling is valid for the tax year in which the specific transaction it describes takes place .

What is this Ruling About?

    • Purpose: BPR 153 helps clarify the tax residency status for foreign individuals (non-residents) who are thinking about moving to South Africa.
    • Specific Scenario: It focuses on a person from a foreign country (referred to as “Country X”) who has recently retired and is spending extended periods in South Africa. This person is considering applying for a temporary residence permit in the form of a retired person’s permit in South Africa.
    • The Key Question: Will simply applying for this temporary retired person’s permit automatically make this individual a “resident” for South African tax purposes, specifically under the “ordinarily resident” definition? This is a crucial question because a person’s tax residency status determines how their global income is taxed by SARS.

The Ruling from SARS:

    • The Answer: SARS has ruled that applying for a retired person’s permit will not, by itself, make you “ordinarily resident” for South African tax purposes .
    • Important Condition: This holds true provided that you do not indicate to the Department of Home Affairs (on your application forms) that your intention is to settle in South Africa on a permanent basis.
    • Simplified Impact: This means that if you’re a foreigner applying for a temporary retirement permit in South Africa, and you don’t express an intention to make South Africa your permanent home on the application, then the application alone won’t make you a South African tax resident.

Why is this Important?

    • Tax Implications: Tax residency determines whether you are taxed on your worldwide income or only on income sourced within South Africa. For a non-resident, avoiding “ordinarily resident” status can have significant tax benefits.
    • Legal Basis: This ruling is an interpretation of Section 1(1) of the Income Tax Act No. 58 of 1962, specifically the definition of “resident”.
    • Binding Nature: As a Binding Private Ruling, it is a formal interpretation by SARS that is binding on both SARS and the specific applicant for the particular scenario described.

Key Takeaways:

    • If you’re a retired foreigner looking to spend time in South Africa using a temporary retired person’s permit, applying for the permit alone doesn’t automatically make you a South African tax resident.
    • The critical factor is your stated intention – if you tell the Department of Home Affairs you plan to settle permanently, that could change your tax residency status.
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