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Understanding tax emigration from South Africa: a comprehensive guide

Understanding tax emigration from South Africa: a comprehensive guide

March 4, 2024


What’s the big deal about tax emigration? If you’ve emigrated, or you’re planning on emigrating, your tax position is something you’re going to have to think about carefully. Simply skipping the country is not enough to shake the South African Revenue Service (SARS) off your tail, and if you’re not careful, you could land up in hot water with the revenue authority. To avoid any nasty tax liability surprises from SARS, it’s important to understand how tax residency affects you. With this in mind, it’s time to unpack the concept of tax emigration from South Africa. Here’s what you need to know.

What is South African tax emigration?

It is the official procedure to terminate your tax relationship with the South African Revenue Service. Tax emigration from South Africa refers to the process of severing your tax ties with your home country and becoming a non-resident for tax purposes. This effectively means you can no longer be taxed on your worldwide income by the South African Revenue Service (SARS), but only on any income sourced from within South Africa.

There are two main aspects to tax emigration:

  1. Residency determination: The first step is establishing that you are no longer a tax resident of South Africa based on the “ordinarily resident” and/or the “physically present” tests.
  2. Capital Gains Tax (CGT): Upon ceasing to be a resident, you are deemed to have “disposed of” all your worldwide assets for capital gains tax purposes (excluding South African immovable property and retirement annuities). This triggers a potential CGT liability, often referred to as the “exit tax,” calculated on the deemed sale value of your assets.

It is important to note that tax emigration does not happen automatically when you leave the country. Nor does it happen automatically when you no longer meet the requirements for tax residency in South Africa.

You will need to formally notify SARS that you wish to cease your tax residency and request that the tax authority officially recognise that you should be treated as a non-resident moving forward.

Financial emigration vs tax emigration: what’s the difference?

Financial emigration was completed through the South African Reserve Bank. It changed an individual’s status from resident to non-resident for exchange control purposes only, it did not affect your tax obligation to SARS. Tax emigration changes an individual’s status from resident to non-resident for tax purposes, and is handled by SARS. Where financial emigration was voluntary, tax emigration is compulsory if you want to leave your tax obligations behind.

Read more:

Who is tax emigration for?

The following individuals will need to complete tax emigration from South Africa:

  1. People who have left South Africa permanently with no intention of returning.
  2. People who want to avoid paying tax in South Africa on their foreign employment income.
  3. People who want to cash in their retirement annuities before the age of 55.

When must you complete tax emigration?

After you have physically relocated from South Africa, it will be necessary to complete tax emigration. You must notify SARS within 30 days that your details have changed.

How long does tax emigration from South Africa take?

Completing tax emigration from South Africa usually takes up to four months, from the time your completed application forms and supporting documents are received. This can, of course, take longer, depending on the complexity of your individual financial and tax situation.

What are the consequences of tax emigration from South Africa?

  • In certain circumstances, you might need to pay an exit tax (Capital Gains Tax) on your emigration.
  • Once your tax emigration has been approved by SARS, you will be issued a Non-Resident Confirmation Letter.
  • After tax emigration, you are no longer liable for tax in South Africa on your worldwide income.
  • If you no longer have any assets or income left in South Africa, you can then deregister from SARS income tax.
  • After three years of being non-resident, you become eligible to withdraw the full value of your retirement annuity savings.

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

Why should you care about tax emigration if you’ve already left South Africa?

Until you officially cease your tax residency with SARS (and you receive confirmation of your status change), the tax authority will still treat you as if you are a tax resident. This means that you will be liable to pay tax in South Africa on any income earned abroad. The only way to be sure SARS isn’t going to spring a tax trap on you at some point in the future is to cut all ties, from a tax perspective.

Read more: What happens if you ceased tax residency in South Africa a number of years ago without notifying SARS?

FinGlobal: tax emigration specialists for South African expats

If paperwork-intensive bureaucratic procedures aren’t your thing, you’d be wise to outsource the stress to the specialists. FinGlobal can handle every step of your tax emigration for you, helping to eliminate the headache and streamline your transition from South Africa to your new country of choice. We can also assist you with expat tax compliance, tax refunds, retirement annuity withdrawals and more.

To put our services to the test, leave us your contact details and a short message, and we’ll be in touch to get the ball rolling for you!

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