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Breaking tax residency with SA: when to apply the physical presence or ordinary residence test

Breaking tax residency with SA: when to apply the physical presence or ordinary residence test

October 2, 2023


Emigrating and getting ready to leave all your troubles and taxes behind? Not so fast. There are a few things to consider first, such as your tax resident status in South Africa. Why is tax residency an important thing to consider when emigrating from South Africa? Well, this is because until you cease your tax residency officially, you will still be considered a tax resident and thus liable to pay tax to the South African Revenue Service (SARS) on your income, even if it’s earned overseas in foreign employment.

What is tax residency status in South Africa?

SARS rules over a tax domain that is residence-based. This means that the revenue authority has power over all South African tax residents and their income, regardless of where they live and earn that income. As such, as long as you are considered a tax resident (and until you break tax residency with South Africa) you will be expected to file a tax return with SARS, declaring all of your income and paying tax accordingly. As you’re likely to also be taxed in your new home country on your income, this doesn’t exactly seem fair and with this in mind, you’re going to want to cease tax residency in South Africa in order to protect your foreign income from the long arm of the revenue authority. Once you have ceased tax residency with South Africa, you will become a non-resident for tax purposes and thereafter you will only be taxed on any income sourced in South Africa.

Read more: Expats! Are you still a tax resident in South Africa? Here’s how to find out.

How do you become a non tax resident of South Africa?

Breaking tax residency with South Africa is not something that happens automatically when you board that international flight out of the Republic. In fact, it is a very bureaucratic, paperwork intensive process that involves making a declaration to SARS that you have ceased to be a tax resident, which triggers an investigation into your tax status. To facilitate this inquiry, you will need to submit a stack of supporting documentation for SARS to consider in their assessment of your tax residency status in South Africa. Once SARS has considered your paperwork and all of the facts of your case, they will either approve your application to cease tax residency, or reject it. If successful, you will become a non-resident for tax purposes.

So how does SARS determine tax residency in South Africa?

Tax residency is determined using two tests. If you fail to meet the conditions of the first test, the second test then applies.

    1. The ordinarily resident test – assesses your intention to be a tax resident of South Africa, based on an examination of your personal circumstances and your financial, social and familial ties to South Africa. If you fail this test, you can still be considered a tax resident by virtue of the second test.
      (Read more on how the ordinarily resident test works in determining tax residency.)
    2. The physical presence test – considers the amount of time spent physically present in South Africa over the past five tax years. This is purely a calendar counting exercise. If you fail this test as well, you are eligible to cease your tax residency with SARS.
      (Read more on how the physical presence test works in determining tax residency.)

So which residency test is used, and when? The ordinary residence test is applied first, with the physical presence test being the fall-back test if the first yields a negative outcome.

Ordinary residence test vs physical presence test – what’s the difference?

As mentioned, SARS uses two tests to establish tax residency in South Africa.

  • The physical presence test is an objective test based on the number of days that a person is physically present in South Africa. A person is considered to be a tax resident in South Africa if they are physically present in the country for at least 91 days in total during each tax year, for five of the previous tax years.
  • The ordinary residence test is a subjective test based on a number of factors, including the individual’s intention to reside in South Africa, their social and economic ties, as well as their family and business interests left in South Africa.

Generally speaking, the physical presence test is used to establish tax residency for individuals who are not ordinarily resident in South Africa. As such, if you have emigrated from South Africa, you can still qualify as a tax resident if you spend enough time back in South Africa,whether visiting family or conducting business. It is important to note that the physical presence test and the ordinary residence test are not mutually exclusive. It is possible for a person to be a tax resident in South Africa under both tests, or just the one test.

What is the 183-day rule in South Africa?

If you are still a tax resident in South Africa (in other words) you’re a fresh emigrant, you might qualify for tax relief in the form of the foreign employment income exemption. This will be important in mitigating your tax burden in South Africa as long as you remain a tax resident, provided you meet the requirements of the 183-day rule.

FinGlobal: let us help you clarify your tax resident status today!

Juggling tax compliance in more than one jurisdiction can be tricky. FinGlobal can assist to ensure that your tax obligations in South Africa are properly met, as long as you remain a tax resident. Once you are ready to terminate your tax residence with SARS, we can then assist you with your tax emigration as well as the migration of your finances abroad including the encashment of your retirement annuity policies.

To get started on your free, confidential, no-strings-attached SARS tax residency assessment, leave your contact details in the form below and we will be in touch! Alternatively, you can send us en email to with all your financial and tax emigration related questions.

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