When you relocate from South Africa, many concerns can be left behind – high crime levels, load shedding and the stress caused by taxis in peak traffic. However, one obligation that doesn’t stay behind quietly is your tax responsibility. The South African Revenue Service (SARS) remains vigilant even if you’ve left the country, making it essential for you to understand your tax duties both ways to minimise the risk of being taxed by both SARS and your new country of residence. To ensure you stay on the correct course, let’s unpack the concept of tax residency, and the implications of tax emigration once you’ve left.

Determining South African tax residence: who is a tax resident?

Ascertaining your tax resident status is the first step to clarifying your tax obligation. It is important to note that because South Africa operates on a residence-based taxation system, if you meet the criteria for tax residency, SARS is entitled to a share of your income whether it’s earned locally or abroad. This is the case even if you no longer physically reside in South Africa.

Read more: Financial Emigration vs Tax Emigration in SA.

Testing tax residency: ordinarily resident and physically present

Tax residency in South Africa is established in two ways: by being ‘ordinarily resident‘ in South Africa or spending enough time there to be considered ‘physically present.‘

Being ordinarily resident means that you intend to return to South Africa at some point after your travels. Even if a South African leaves for an extended period, as long as they have plans to return, they will remain ordinarily resident for tax purposes. In this respect, SARS assesses:

• The location of your business, personal interests, and family ties
• The location of your most settled residence and belongings
• Your participation in educational institutions, places of worship, and social clubs

If you are not considered ordinarily resident, you can still be counted as a tax resident if you’ve spent more than 91 days in South Africa during the current tax year and each of the preceding five years, or if you’ve been in South Africa for more than 915 days in the previous five tax years. This is known as the ‘physical presence test.’

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

What does this mean for your tax liability in South Africa after emigrating?

South African tax residents are required to pay taxes on their global income, while non-residents are only taxed on income derived from South Africa. Despite the Common Reporting Standard facilitating the sharing of information between revenue authorities, if you do not change your tax status through tax emigration, SARS can still treat you as a tax resident and tax you on all income. This could lead to double taxation in your new country of residence.

Read more:

• Tax refunds for South Africans living abroad: do I have to file a return as a non-resident?
• What is the SARS foreign income tax exemption in South Africa and how do you claim it?
• Living abroad? How the 183 days tax rule applies to you as a South African earning a foreign income.

No looking back: emigrating from South Africa with no intention to return?

If you plan to leave South Africa permanently, you must go through the tax emigration process when you become eligible (usually 330 days after your departure):

1. Complete the “Registration, Amendments, and Verification form” (RAV01) on SARS eFiling.
2. Ensure the correct cessation date of tax residency is recorded in your “Income Tax Liability Details” section (this is the day of your departure)
3. Update your details using the RAV01 before submitting your annual tax return to avoid manual intervention by SARS.
4. Await a response from SARS regarding your RAV01 form submission and submit the requested supporting documents.
5. Pay your exit tax and receive your Non-Resident Confirmation Letter from SARS.

How is exit tax calculated in South Africa?

Upon terminating your tax residency, SARS treats you as if you have disposed of your worldwide assets, with the exception of your South African immovable property. This could make you liable for capital gains tax in certain circumstances. This calculation, known as ‘exit tax,’ includes discretionary unit trust investments but not your retirement fund savings. If exit taxes are owed to SARS, they are payable immediately.

Read more: What you need to know about how exit tax is calculated in South Africa.

Are there benefits to completing tax emigration with SARS?

• Not everyone is liable to pay exit tax (not everyone has worldwide assets) and there are a number of benefits that come with your new status as non-resident for tax purposes.
• You are no longer liable to pay tax on worldwide income in South Africa.
• You become eligible to cash in your retirement annuity after maintaining tax non-resident status for three years.
• You can become a tax resident in your new home country.

FinGlobal: cross-border tax emigration specialists for South Africans

If you’re ready to simplify your financial affairs and cease your tax residency with SARS, FinGlobal can assist you in exiting the South African tax system and cashing in your retirement annuity. With a track record of assisting thousands of clients in more than 105 countries, we offer a convenient, hassle-free service for South Africans abroad.

To explore how we can streamline your financial transition when emigrating from South Africa, leave your contact details below, and we’ll be in touch. You are welcome to email us at info@finglobal.com with any financial and tax emigration questions.