Tax clearance vs tax emigration: what’s the difference?

If you have recently relocated overseas, it is completely normal to feel confused by South Africa’s tax jargon. Two terms in particular cause the most frustration for expats: tax clearance and tax emigration. They sound similar, but they have very different outcomes. One lets you transfer money out of South Africa. The other determines whether SARS can keep taxing your worldwide income and how future withholding tax South Africa rules apply to you.

Understanding the difference will help you avoid paying unnecessary tax, prevent delays when moving money, and ensure that you stay compliant, no matter where you live in the world.

Top 3 takeaways on tax clearance and tax emigration for expats:

1. Tax clearance and tax emigration are not the same thing. Tax clearance only allows you to move funds offshore. It does not affect your global tax status.
2. Tax emigration changes how SARS taxes you going forward. Once you become a non tax resident of South Africa, only locally-sourced income remains taxable.
3. Withholding tax becomes important once you are a non-resident. This is how SARS taxes your SA-sourced interest, dividends and property income, even after tax emigration.

Read more: Understanding withholding tax in South Africa: A guide for non-residents.

What is tax clearance used for?

A tax clearance is an approval from SARS that allows you to transfer funds out of South Africa. You obtain this via a Tax Compliance Status (TCS) PIN, which authorised dealers and banks use to confirm your compliance before releasing your money offshore.

You typically need tax clearance when:

• Using your foreign investment allowance
• Moving more than R1 million in a calendar year
• Receiving an inheritance
• Transferring retirement savings offshore after changing your tax residency

The important part is this: tax clearance is transactional. It does not affect whether SARS treats you as a resident or non-resident. It also does not reduce or remove any withholding tax that may apply to certain types of income.

What does tax emigration change about your tax status?

Tax emigration is the process of informing SARS that you no longer meet the requirements to be a tax resident in South Africa. Once approved, you become a non resident for tax purposes in South Africa, SARS will only tax you on income that has a South African source.

This is where withholding tax becomes relevant. As a non-resident, certain income is automatically taxed at source in South Africa, including:

• Withholding tax dividends and foreign dividend withholding tax
• Withholding tax on interest and interest withholding tax non resident
• Property withholding tax and withholding tax on property sale
• South Africa withholding tax on services
• Withholding tax non residents South Africa on specific income categories

These withholding mechanisms ensure SARS still collects tax on South African sourced income without requiring you to file full returns in every instance.

Tax emigration does not stop these forms of withholding. It only stops SARS from applying global taxation to your foreign income.

When would South Africans pay withholding tax?

Many expats are surprised to learn they become subject to non resident withholding tax only after tax emigration. You may pay withholding tax when you earn:

• SA-sourced dividends
• SA-sourced interest
• Income from the sale of South African property
• Payments for services performed in South Africa
• Certain capital distributions

This is why understanding your residency status is important. Remaining a tax resident means SARS taxes your worldwide income according to the South African income tax rate table. Becoming a non-resident means SARS stops taxing global income, but withholding tax then applies to the South African income you earn thereafter.

Read more: Emigration and changing your tax resident status after leaving South Africa.

Do you need both tax clearance and tax emigration as an expat?

In many cases, yes. This is because tax clearance and tax emigration solve different problems.

• Tax clearance allows you to physically transfer money out of South Africa.
• Tax emigration determines whether SARS still taxes your offshore salary, interest, or investment income.

You can have tax clearance without tax emigration, meaning you can move funds but still be taxed on your global income. You can also complete tax emigration but still need tax clearance to transfer money. The two processes work together, especially for expats planning long-term financial moves.

How do double tax agreements affect withholding tax?

A double taxation agreement is an understanding that South Africa has with other countries to help prevent the same income from being taxed twice. Such treaty, often referred to as a double tax treaty with South Africa, helps to determine:

• Which country has the taxing right over interest, dividends and property
• Whether a reduced withholding tax DTA rate applies
• Whether South Africa may apply withholding tax on interest paid to non residents
• How income from South African assets is taxed once you emigrate

It is important to acknowledge that a SARS DTA does not make you a non-resident, it simply coordinates tax rules between two countries. Only formal tax emigration changes your global tax status with SARS.

Why does this distinction matter for expats?

The confusion usually happens here: some expats seem to think tax clearance is the step that ends their obligation to SARS. It is not. You will have an obligation to pay tax to SARS as long as the revenue authority still considers you a tax resident.

On the other hand, tax emigration gives you relief from worldwide taxation, but you will still face withholding tax on South African sourced income such as dividends, interest or property transactions.

Understanding this difference protects you from unnecessary tax, delays, penalties, and administrative headaches.

How does the Approved International Transfer (AIT) process affect tax clearance and tax emigration?

This process is now the standard SARS mechanism for moving large sums of money offshore, particularly once you become a non tax resident of South Africa. The new AIT process has replaced the old “Foreign Investment Allowance” system and is now required for expats who need to transfer:

• Retirement funds
• Trust distributions
• Inheritances
• Proceeds from the withholding tax on property sale
• Savings or investments

Here’s how AIT connects to tax emigration and your non-resident status:

1. AIT confirms your tax residency – SARS verifies whether you are still a tax resident in South Africa or have completed tax emigration.
2. AIT checks withholding tax compliance – SARS ensures all applicable withholding tax dividends, withholding tax on interest paid to non residents, and south african dividend withholding tax have been applied.
3. AIT requires proof of foreign tax residency – You must provide a Tax Residency Certificate to show where you pay foreign tax, which is relevant in terms of double tax agreements with South Africa.
4. AIT differentiates SA-sourced vs foreign income – Ensures you are taxed correctly, applying non resident withholding tax to SA income but not to foreign income.
5. AIT is mandatory for offshore transfers – Without it, many expats cannot move retirement funds or large investments legally.

Read more: Don’t let SARS delay your international transfer – essential documents for expats.

FAQs for South African expats:

1. What is the difference between tax clearance and tax emigration in South Africa?

Answer: Tax clearance lets you legally move money offshore but does not change your tax resident status in South Africa. Tax emigration officially ends your South African tax residency, so SARS stops taxing your worldwide income and only taxes South African sourced income.

2. How do I transfer money abroad after emigrating from South Africa?

Answer: You must use the Approved International Transfer (AIT) process. SARS verifies your non-resident tax status in South Africa, checks withholding tax compliance, and ensures the transfer follows the rules outlined in double taxation agreements with South Africa. AIT is mandatory for retirement funds, trust distributions, inheritances, property proceeds, and large investments.

3. When does a South African non-resident have to pay withholding tax?

Answer: Once classified as a non tax resident of South Africa, you may pay withholding tax on SA-sourced income, including:

• Dividends (withholding tax dividends, foreign dividend withholding tax)
• Interest (withholding tax on interest paid to non residents)
• Property sales (property withholding tax)
• Certain payments for services performed in South Africa

Double tax agreements (DTAs) can reduce the rate in many cases.

4. Can double tax agreements reduce my South African withholding tax as an expat?

Answer: Yes. Double tax agreements with South Africa prevent the same income from being taxed twice. They can reduce withholding tax rates on dividends, interest, and royalties. However, a DTA does not change your residency; you still need tax emigration to stop worldwide taxation.

5. Do I still need tax clearance or AIT after completing tax emigration?

Answer: Yes. Even after SARS recognises you as a non-resident tax of South Africa, you still need tax clearance by means of the AIT process to legally transfer funds offshore. Tax emigration changes your tax residency, but SARS clearance or approval is what allows the actual movement of money.

FinGlobal: cross-border financial specialists for expats

For South Africans living abroad, FinGlobal assists with:

• Completing tax emigration from South Africa
• Applying for AIT tax clearance and obtaining TCS PIN
• Making it easy to move money offshore in a safe and compliant way
• Explaining withholding tax exposure and how DTAs may help
• Understanding double tax agreements with South Africa
• Ensuring SARS correctly reflects your non-resident status

We make every process simple, accurate and stress free, no matter where in the world you live.

If you need help managing your tax obligations, clearing funds or changing your South African tax resident status, FinGlobal is just a few clicks away.