Leaving South Africa to work or live abroad? You might assume that once you step onto a plane, you’re automatically off the hook for South African tax. But not so fast! The reality is a little more complicated. Many South Africans living and working overseas are surprised to learn they could still be liable for South African expat tax, even if they’ve left the country for good.
Let’s break down what you need to know about your tax obligations when leaving South Africa, especially if you haven’t formally undergone tax emigration.
Do I have to pay tax in South Africa as an expat?
The first thing to understand is that South African tax is based on residency, not just physical location. This means if you are still considered a tax resident of South Africa, you are taxed on your worldwide income, including foreign income. Yes, that’s right: even if you’re living abroad, South Africa may still want a cut of your earnings.
Read more: Hot question: Do you pay tax in South Africa if you live abroad?
So, how do you know if you’re a tax resident? SARS applies two tests:
- Ordinary residence test: If South Africa is the place where you normally live and to which you regularly return, you may still be considered a tax resident.
- Physical presence test: If you spend more than 91 days a year in South Africa, or a total of 915 days over five years, you could still be considered a tax resident.
If you don’t meet either test, you could be regarded as a non-resident for tax purposes – but this doesn’t happen automatically. You must formally cease tax residency with SARS.
Read more: Breaking tax residency with SA: when to apply the physical presence or ordinary residence test.
What are the tax implications of not completing tax emigration?
If you leave South Africa without going through the tax emigration process, SARS will still treat you as a tax resident, meaning you are liable for South African tax on foreign income. This is where many South African expats get caught out.
Even if you’re working abroad, South African tax for expats still applies unless you formally change your tax status. This means you might have to pay tax on:
- Salary earned overseas
- Investment income
- Rental income
- Pension income
Unless you claim specific foreign income tax exemptions, you could face double taxation – paying tax both in South Africa and in the country where you’re working.
Read more: The dangers of not completing tax emigration after you leave South Africa.
How much foreign income is tax-free in South Africa?
South Africa does provide a limited foreign income tax exemption under Section 10(1)(o)(ii) of the Income Tax Act. This means that the first R1.25 million of your foreign employment income in a tax period is exempt from tax, but only if you meet the necessary conditions.
To qualify for this exempt foreign employment income, you must:
- Be a South African tax resident (yes, you read that right)
- Be employed by a foreign employer
- Work outside South Africa for at least 183 days in any 12 months, of which 60 days must be continuous
If you don’t meet these requirements, tax on foreign income in South Africa applies in full.
Read more: Don’t get caught in the tax trap – claiming your South African expat tax exemption.
What if I want to stop being a tax resident of South Africa?
The only way to completely cut ties with SARS is to cease tax residency. This is often referred to as tax emigration (not to be confused with financial emigration, which has been phased out).
If you’ve emigrated and want to break tax residency with South Africa, here’s what you need to do:
1. Notify SARS of your intention to cut tax ties with South Africa:
- Submit a RAV01 form on eFiling.
- Indicate the date you ceased tax residency.
- Include supporting documents:
○ Declaration of Cease to be a Tax Resident
○ Letter of motivation
○ Passport/travel diary
○ Proof of new address abroad
2. Meet the criteria to change your status to non-resident:
- Ordinarily resident test: Prove you’ve left South Africa permanently and severed ties.
- Physical presence test: Be outside SA for 91+ days per tax year, for five years.
3. Pay exit tax (if applicable):
- You may need to pay a once-off capital gains tax (exit tax) on your worldwide assets.
4. Get your non-resident confirmation letter:
- Once SARS accepts your application and any exit tax is paid, you’ll receive a Non-Resident Confirmation Letter as proof of your non-resident status.
Once SARS accepts your application and notes your change of tax status as non-resident, you’ll only pay South African tax on income sourced in South Africa – like rental income from a property in SA or dividends from a South African company.
Until you go through this formal process, you are still a tax resident, even if you haven’t set foot in the country for years.
Read more: Tax emigration – how to become a non-tax resident of South Africa.
Do I still have to file a tax return as a non-resident?
Yes! Even if you’re a tax non-resident, you might still need to file a tax return in South Africa. This applies if you:
● Earn South African-sourced income (e.g., rental income, dividends, or pensions)
● Need to claim a foreign income tax exemption
● Have capital gains tax liabilities (e.g., if you sell a property in South Africa)
Read more: Do I still need to submit my South African tax returns if I’ve emigrated?
How to avoid double taxation when working overseas
Many South Africans working abroad worry about double taxation – paying tax in both South Africa and their new country. The good news is that South Africa has Double Taxation Agreements (DTAs) with many countries, which can prevent this.
However, claiming relief under a DTA or the foreign income tax exemption can be tricky. It’s essential to get professional advice to avoid penalties and make sure you’re compliant with both countries’ tax laws.
Read more: A comprehensive guide to the SARS foreign income tax exemption for South Africans working abroad.
FinGlobal: here to help you stay on the right side of SARS
Whether you’re planning a short stint overseas or a permanent move, you must be clear as to your South African expat tax obligations and how income tax applies to you. Don’t assume that leaving the country means you automatically stop paying tax in South Africa – without tax emigration, you could still owe SARS on your foreign income.
If you need help finding your way through the complexities of South African tax on foreign income, FinGlobal is here to help. We can guide you through expat tax compliance, tax refunds and tax emigration and even assist with cashing in your South African retirement annuity.
So what are you waiting for? Get in touch with FinGlobal today for expert advice and peace of mind.