FREQUENTLY ASKED QUESTIONS
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No, tax emigration deals solely with your tax residency status with SARS and does not affect your South African citizenship. You retain your South African citizenship and the right to return to the country.
Once you have successfully ceased your tax residency, you are only required to file a tax return if you have income from a South African source, such as rental income from a property or dividends from a local company.
When you cease your tax residency, SARS deems you to have sold all your global assets (excluding immovable property in South Africa) to yourself at their market value on the day before you ceased residency. This can result in a Capital Gains Tax (CGT) liability, commonly known as “exit tax.”
Under the new rules, you can access your retirement annuity or preservation fund as a lump sum after you have ceased your tax residency and maintained non-resident status for at least three consecutive years.
While the term “financial emigration” was previously a formal process with the South African Reserve Bank (SARB), the process has now been replaced with a formal SARS tax emigration process. The focus is now on ceasing your tax residency with SARS.
SARS determines your tax residency using two tests: the “ordinarily resident” test (a subjective assessment of your primary home and intentions) and the “physical presence” test (an objective assessment based on the number of days you spend in South Africa over a specific period).
Under Section 10(1)(o)(ii) of the Income Tax Act, South African tax residents working abroad can claim an exemption on their foreign employment income. This exemption currently applies to the first **R1.25 million** of foreign salary or remuneration earned, provided you meet specific requirements, including spending at least 183 full days outside of South Africa in any 12-month period, with at least 60 of those days being consecutive.
As a South African tax resident living abroad, you are still liable for tax on your worldwide income. However, the expat tax exemption, along with possible relief from a Double Taxation Agreement (DTA), can significantly reduce or eliminate your tax burden in South Africa. We help you navigate these complex rules to ensure you are fully compliant.
Any foreign employment income earned above the R1.25 million threshold will be subject to normal South African income tax. We can help you analyze your specific situation and apply for foreign tax credits to avoid paying tax twice on the same income.
If you’re a South African tax resident paying tax on your foreign employment income in a country that doesn’t have a DTA with South Africa, you may be able to claim a foreign tax credit. This credit is used to reduce your South African tax liability by the amount of tax you’ve already paid overseas.
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John D. Rockefeller
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