There’s being a South African citizen, and then there’s being a South African tax resident. Same thing, indeed? You might be surprised to discover that being a citizen and a tax resident differs in South Africa. You might be even more surprised to discover that you can be one thing without being the other. What do we mean? Let’s discuss South African citizenship, tax residency and exchange control rules to give you the full picture.

Citizenship vs. tax residency in South Africa

Citizenship and tax residency are two distinct concepts in South Africa, each with implications for legal rights and tax obligations. South Africa has a residence-based taxation system, meaning that individuals who meet the requirements for tax residency are taxed on their worldwide income, regardless of where it was earned.

South African citizenship

• Definition: Citizenship is a legal status that grants an individual the right to belong to a country and enjoy its privileges and protections.
• Benefits: Citizenship often includes the right to live, work, and vote in the country and access to public services.
• Acquisition: Citizenship can be acquired by birth, descent, or naturalisation.

South African tax resident

• Definition: Tax residency determines where an individual must pay taxes. It’s based on factors such as the duration of stay and the nature of ties to a country.
• Implications: Tax residents are generally required to pay taxes on their worldwide income, regardless of where it’s earned.
• Determination: South Africa uses a combination of physical presence and ordinarily resident tests to determine tax residency.

Key differences between citizenship and tax residency

• Citizenship is a fundamental legal status, while tax residency is primarily tax-related.
• Citizenship grants broader rights and protections, while tax residency primarily affects tax obligations.
• Citizenship is not directly linked to tax residency. It’s possible to be a citizen of South Africa but not a tax resident, or vice versa.

Understanding the distinction between these two concepts is not just important, it’s vital for individuals who live or work outside of South Africa. It empowers you to make informed decisions about your tax obligations and legal rights.

What happens to your citizenship or tax residency when you emigrate from South Africa?

Citizenship and tax residency are distinct concepts that are affected differently by emigration from South Africa.

Citizenship generally remains unaffected by emigration. You remain a South African citizen unless you voluntarily renounce your citizenship or it is revoked for a specific reason, such as acquiring citizenship elsewhere. It’s possible to hold dual citizenship with South Africa and another country, mainly if you were born in or have a solid connection to another nation. Still, it is essential to note that you must apply to retain your South African citizenship before attempting to acquire another.

Read more: 3 essential things you need to know about your South African citizenship.

When you emigrate from South Africa and establish a permanent home in another country, your tax residency is generally affected. However, until you complete the official process of tax emigration, the South African Revenue Service is entitled to continue treating you as a South African tax resident. This means you could be liable for tax on your foreign employment income back in the Republic.

Once you have had your status changed from resident to non-resident for tax purposes, an exit tax is triggered if you meet specific criteria. This is a tax on the deemed disposal of certain assets you hold during your emigration.

Essential things to keep in mind when it comes to tax residency in South Africa:

• Tax treaties: The tax treaties between South Africa and your new country of residence could affect your tax obligations.
• Be cautious about maintaining significant financial ties to South Africa, such as property ownership or business interests, as these could impact your tax residency status. Similarly, the tax treaties between South Africa and your new country of residence could significantly affect your tax obligations.
• It’s essential to consult with a tax professional to understand the specific tax implications of your emigration and to ensure compliance with both South African and foreign tax laws. This is particularly important if you have significant financial ties to South Africa, such as property ownership or business interests.

Read more: Taxing matters: a guide to understanding South African tax residency for expats.

How to determine tax residency status for South Africans

SARS looks at two main tax residency tests when considering whether or not you are a South African tax resident. These are:

1. Ordinarily resident test: SARS assesses whether you ordinarily reside in South Africa. This involves considering factors such as your intention to remain in the country, the nature and duration of your ties to South Africa, and your pattern of living.
2. Physical presence test: SARS determines whether you have spent more than the prescribed time in South Africa during a tax period. If you have, you are generally considered a tax resident.

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

FinGlobal: tax specialists for South Africans living overseas

Managing the complexities of tax residency across two jurisdictions can be daunting, especially for those who have recently emigrated from South Africa.

Understanding your tax obligations and ensuring compliance with domestic and foreign tax laws is vital. FinGlobal offers expert guidance and support to help you manage your tax affairs effectively. Our team of cross-border financial planners and tax advisors can assist you with:

• Determining your tax residency status: It is essential to understand your tax residency in both South Africa and your new country of residence.
• Streamlining your tax affairs: We can help you organise your financial records and simplify your tax reporting process.
• Resolving tax issues: Our experts can assist with tax clearance and refunds and address administrative challenges.
• Retirement annuity withdrawals: We can guide you through withdrawing your retirement annuity funds once you’ve become a non-resident for tax purposes.

To learn more about how FinGlobal can simplify your tax affairs, please leave your contact details below, and we’ll contact you.