Living abroad sounds like the perfect excuse to forget about the South African Revenue Service (SARS) and taxes, right? Not so fast. If you’re an expat earning or investing overseas, you might still need to think about SARS tax on foreign investments.
A question we hear all the time is: “Are my investments taxable as a South African expat?” The answer isn’t a simple yes or no—it all comes down to whether you’re still considered a tax resident of South Africa. Getting this wrong could mean paying more tax than you need to or, even worse, facing penalties from SARS.
Let’s break it down in plain language.
Do South African expats pay tax on investments abroad?
If you are a South African tax resident, then yes. South Africa follows a residence-based tax system, which means you are taxed on your worldwide income. This includes income and capital gains from both local and offshore investments. So, whether it’s interest from a foreign savings account, dividends from an overseas share portfolio, or profits from selling property abroad, SARS wants to know about it.
If you are a non-resident for tax purposes, it’s a different story. Once you’ve formally ceased your tax residency, South Africa only taxes you on South African-sourced income and capital gains from assets located in SA (like property or shares in a South African company). In this case, your offshore investments are no longer taxable in South Africa.
Are foreign investments taxable if I live outside South Africa?
This is where many expats get caught out. Living abroad does not automatically change your tax residency status. You must still prove to SARS that you are no longer a South African tax resident. Until you do, SARS will continue to treat you as one, and your foreign investment income remains taxable in South Africa.
To determine your residency, SARS applies two tests:
- Ordinarily Resident Test: If South Africa is the country you naturally call “home,” even after years abroad, SARS may still see you as a tax resident. They’ll consider factors like where your family lives, where you own property, and where your long-term financial interests lie.
- Physical Presence Test: If you spend at least 91 days in SA in the current tax year, plus 91 days in each of the previous five years, and a total of 915 days in those five years, you’re a tax resident. However, you can break this residency if you are outside South Africa for a continuous stretch of 330 days.
The bottom line: You must formally cease tax residency with SARS to ensure your foreign investments are no longer taxable here.
How does SARS tax expat investment income?
SARS applies different rules depending on whether you are a South African tax resident (subject to worldwide taxation) or a non-resident (subject only to South African-sourced income).
For South African Tax Residents
A South African tax resident is taxed on their worldwide income and capital gains, regardless of where the investment is held.
| Income Type | How SARS Sees It | What You Should Know |
| Interest Income | Fully taxable as ordinary income. | The annual local interest exemption (R23,800 or R34,500) only applies to interest from South African sources. It does not apply to foreign interest. |
| Foreign Dividends | Taxable at a maximum effective rate of 20%. | Foreign dividends are included in your taxable income. Foreign Tax Credits are usually available to reduce the tax you owe in South Africa if the foreign country has already withheld tax. |
| South African Dividends | Subject to 20% Dividend Withholding Tax (DWT). | This tax is deducted by the company before you receive the dividend and applies whether you are a resident or non-resident. |
| Capital Gains | Subject to Capital Gains Tax (CGT). | For individuals, 40% of the net capital gain is included in your taxable income, with a maximum effective CGT rate of 18%. The annual exclusion (currently R40,000) applies. |
Note: A full exemption for a foreign dividend typically only applies if a resident holds 10% or more of the equity and voting rights in the foreign company, a rule that rarely applies to individual retail investors.
For Non-Residents
A non-resident who has formally ceased tax residency is only taxed by SARS on income that has a South African source. This includes:
- Rental income: From any South African-based property.
- Dividends: Paid by South African companies (subject to 20% DWT).
- Capital gains: Only on the sale of South African immovable property (land and buildings) or assets of a permanent establishment (e.g., a branch office) in South Africa.
Income and capital gains from your offshore assets (like foreign shares or bank interest) are not taxed by SARS if you are a non-resident.
What happens to my investments after tax emigration?
When you cease tax residency, SARS treats it as if you’ve sold all your worldwide assets—except for South African property. This is known as the exit tax or “deemed disposal,” and it can trigger a significant Capital Gains Tax (CGT) bill.
After this one-off tax event, your foreign investments are no longer taxable in South Africa. However, any investments you keep in South Africa (like shares or property) remain subject to local taxes.
Read more: Understanding South Africa’s exit tax – a guide for expats.
Can South African expats access their retirement funds from abroad?
Yes, but there are rules. If you’ve ceased tax residency, you can apply to withdraw your retirement annuity after proving you’ve been a non-resident for three consecutive years. Withdrawals are taxed in South Africa before the money is paid out.
Once the funds are released, they can be transferred abroad using the Approval for International Transfers tax compliance process from SARS.
Read more: Tax on retirement annuity withdrawal in SA – what expats need to know.
What about double taxation?
Many expats worry about being taxed twice—once in South Africa and again in their new country. Thankfully, South Africa has Double Taxation Agreements (DTAs) with many countries. These treaties ensure the same income isn’t taxed twice, often by allocating taxing rights or allowing you to claim foreign tax credits.
Read more: It’s complicated – South African expats face double tax relief hurdles with SARS.
Key considerations for expats with investments
- Declare everything: If you remain a tax resident, you must declare all your global income and investments to SARS.
- Keep good records: Maintain accurate records of transactions, dividends, and any foreign tax you’ve paid.
- Know the rules: Moving money offshore may require SARS tax clearance.
- Don’t go it alone: Tax rules for expats are complex. Seeking professional advice is crucial to avoid costly mistakes.
FinGlobal: Your cross-border financial specialists
Navigating SARS tax on foreign investments can be tricky. With residency tests, DTAs, and exchange control rules, it’s easy to make a wrong move that could lead to double taxation or penalties.
This is where FinGlobal can help. Our team of certified international financial planners, tax specialists, and accountants will guide you through:
• Clarifying and optimising your tax residency status.
• Handling your financial emigration and exit tax.
• Withdrawing your retirement funds from abroad.
• Moving money out of South Africa compliantly.
No matter where you are in the world, FinGlobal has the expertise to simplify your cross-border finances—so you can get back to living your best expat life.
Interested in learning more? Leave your contact details below, and we’ll be in touch.