For South Africans moving abroad, one of the most confusing (and often overlooked) issues is tax. You might have heard terms like tax emigration, financial emigration, or even exit tax South Africa, but what do they actually mean?
In simple terms, ceasing tax residency in South Africa is about changing how SARS treats your income. Get it right, and you could save yourself from unnecessary tax bills, penalties, or even paying tax twice in two different countries. Get it wrong, and you may face the dreaded double taxation headache.
In this guide, we’ll cover:
• What tax emigration really involves
• The SARS residency tests and how they work
• Why you might face an exit tax when leaving
• The R1.25m foreign employment income exemption
• The importance of a SARS non-resident confirmation letter
Tax emigration is the formal process of updating your residency status with SARS so you’re no longer treated as a South African tax resident. It doesn’t affect your passport or citizenship — only how you’re taxed.
• Still a South African tax resident? SARS taxes you on your worldwide income. That’s salary, investments, rental income abroad — everything.
• Working overseas temporarily? You may qualify for the foreign employment income exemption of up to R1.25 million if you spend more than 183 days abroad (with 60 of those consecutive). Anything above that is still taxable in South Africa.
• Non-resident for tax purposes? You’ll only pay tax on South African-sourced income, such as rental income, local dividends, or capital gains on SA property.
In other words, financial emigration isn’t just paperwork — it’s a way of drawing a clear tax line between your new life abroad and your ties back home.
SARS doesn’t rely on guesswork. They use two main tests to determine whether you’re still a tax resident.
1. Ordinarily Resident Test
This test is subjective and asks: Where is your true home? SARS considers:
• Where your family lives
• Where your permanent home is located
• Whether you keep personal belongings in SA
• If you regularly return to the same place in South Africa
If your core ties are still in South Africa, SARS may argue you’re still a tax resident.
2. Physical Presence Test
If you’re not ordinarily resident, SARS will check your physical presence:
• Did you spend more than 91 days in South Africa in the current tax year?
• More than 91 days in each of the last five tax years?
• More than 915 days in total across those five years (averaging 183 per year)?
Fail these thresholds and remain outside SA for at least 330 consecutive days, and you’re considered a non-resident.
Together, these SARS tax residency tests are crucial for determining your obligations.
One major concern for expats is being taxed twice — once in South Africa and again in their new country. Thankfully, South Africa has Double Taxation Agreements (DTAs) with many countries, including the UK.
DTAs can:
• Ensure you’re only taxed in one jurisdiction
• Provide credits to offset tax paid abroad
• Sometimes reduce the tax rate on certain income types
Understanding how DTAs apply can prevent unnecessary payments — and often requires professional interpretation.
When you cease tax residency in South Africa, SARS applies a Capital Gains Tax (CGT) on your worldwide assets, as though you sold them the day before leaving. This is known as exit tax.
• South African property and retirement annuities are excluded
• Effective CGT rates range between 7.2% and 18%, depending on your tax bracket
• Leaving earlier in the tax year may reduce your liability since your income is lower
This “deemed disposal” catches many expats off-guard. Careful planning — ideally before your departure — can make a big difference to how much you pay.
Even if you believe you’ve met the tests, SARS will still expect formal proof. A non-resident confirmation letter is your evidence that your status has officially changed.
Without it, you risk:
• Being treated as a tax resident despite living abroad
• Continued global income reporting obligations
• Possible back-dated emigration penalties
This document is key to protecting your new status — and your peace of mind.
For South Africans who haven’t yet formally emigrated, the foreign employment income exemption is a valuable relief.
• You can earn up to R1.25m tax-free if you work abroad for at least 183 days in a 12-month period, with 60 consecutive days included.
• Anything over R1.25m remains taxable in South Africa.
While useful, this is only a partial fix. Long-term, financial emigration and formal non-residency offer more certainty and fewer reporting headaches.
Between exit tax, DTAs, SARS residency tests, and penalties, it’s easy to make costly mistakes. That’s why working with an international tax professional is invaluable.
The right adviser can:
• Confirm your residency status
• Guide you through SARS eFiling and declaration processes
• Plan for exit tax South Africa liabilities
• Ensure compliance in both South Africa and your new country
Think of it as an investment in peace of mind — and in keeping more of your hard-earned money.
If you’re planning to leave South Africa, or you’ve already made the move, don’t ignore your tax obligations. Tax emigration is about more than paperwork: it’s about protecting yourself from double taxation, avoiding back-dated penalties, and making a clean financial break.
With the right planning and professional support, ceasing tax residency in South Africa can be straightforward — helping you reduce tax, stay compliant, and start your new chapter abroad with financial confidence.
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