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Will moving abroad affect my tax obligations? What every South African must know before emigrating

By July 17, 2023October 5th, 2023FinGlobal

Will moving abroad affect my tax obligations? What every South African must know before emigrating

July 17, 2023


You’ve planned every logistical aspect of your relocation abroad, but have you given much thought to the tax and financial implications of your move? If you were thinking you could just “figure it out” once you’ve settled abroad, we’re here to tell you otherwise. It’s always best to go into any new situation with your eyes wide open, fully prepared and ready to hit the ground running. Avoiding nasty surprises and tax compliance problems starts with knowing what to expect tax-wise from the South African income tax regulations once you become an expat.

With this in mind, let’s take a look at some of the most frequently asked questions about South African tax residency, expat tax, foreign income tax and tax emigration.

Do I pay tax in South Africa if I work overseas?

As someone who is planning a permanent relocation overseas, or if you’re planning on moving abroad for work with the intention to return some day to South Africa, it’s critical to be clear on your tax obligations to your home country. No matter where you go, as long as you are considered a South African tax resident you will be expected to pay income tax on your foreign and local income.

Who pays what? The key difference in income tax obligations between residents and non-residents

The South African Revenue Service (SARS) is entitled, to tax you on your worldwide income until you have formalised your non-tax residency status. This is particularly important, as a South African can emigrate and become a tax resident in another country, and still be considered a tax resident in South Africa.

How is tax residency determined in South Africa?

To qualify as a South African tax resident you must meet either the ordinarily resident or physical presence tests. However, failure to meet either one of these tests does not automatically mean you’ve become a non-resident of South Africa, for tax purposes.

The only way to cut tax ties with SARS (and thus reduce your tax obligation) is to complete the process of tax emigration, by which you cease to be a tax resident of South Africa and become a non-resident.

Once you have completed the process in which SARS verifies that you no longer meet the requirements of tax residency, you need to obtain a Non-Resident Confirmation Letter, which is proof of the fact that SARS has noted your change in tax status. Once you have this, you will no longer be taxed on your foreign income, but only on income with a South African source.

How much foreign income is tax free in South Africa?

For as long as you are still considered a tax resident after you have relocated, you will be taxed on your foreign income back in South Africa. As a South African tax resident, you do have access to the foreign income tax exemption if you meet the requirements. Using this method of tax relief will allow you to exclude R1.25 million from your taxable foreign income in South Africa.

How do I inform SARS of my emigration and change my tax status?

By means of a form, obviously. SARS loves their paperwork, and you will need to complete the necessary declaration form which you will submit along with the relevant supporting documentation through eFiling.

How do I apply for South African tax emigration?

What is involved in the process? To stop being a tax resident with SARS, you must make the case for your cessation, proving that you no longer meet the requirements of the two South African tax residence tests: the ordinarily resident test and the physical presence test.

  • The ordinarily resident test considers your primary home, family base, and asset location. If any of these factors point to South Africa, regardless of your time spent abroad, you will be considered a South African tax resident. You must be able to show that you have no significant ties left in South Africa.
  • The physical presence test examines the number of days you spend physically present in South Africa. You’ll be deemed a tax resident if you’re physically present for 91 days or more during the current year, 91 days or more in each of the previous five years, or 915 days or more in total over the past five years.

After 365 full calendar days have passed from the day you boarded a plane to leave South Africa, you will technically cease to be a tax resident. At this point you will be eligible to start the process of tax emigration.

Until the process is complete, you will still be considered a tax resident, you will still need to file a tax return, and you will still be taxed on your foreign and local income.

What does South African tax emigration mean for my retirement savings?

To access your retirement annuity funds before you turn 55, tax emigration is now your only option. However, once you have become a non-resident, you must maintain this status for at least three years before you become eligible for an early withdrawal.

From a tax administration perspective, it is your responsibility to inform SARS that you are no longer a tax resident, and obtain a valuation of your retirement fund on the day before your tax residency ends. You will then need a tax directive from SARS, which allows them to tax your retirement annuity lump sum payout, after which you will be free to transfer your money abroad.

FinGlobal: tax specialists for South Africans abroad

Tax compliance as an expat can get complicated and with SARS cracking down on emigrants, it’s important to ensure you’re on the right side of the income tax law. FinGlobal can assist you with your tax transition. We’re ready to help you with the process of tax emigration, and to guide you through cashing in your retirement annuity once you have become a tax non-resident.

To see how our services can help you simplify your tax obligations and wrap up your financial affairs in South Africa , drop your contact details in the form below and we’ll be in touch.

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