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Tax Emigration from South Africa
What is Tax Emigration?
Tax Emigration is the formal process of changing your tax residency status with the South African Revenue Service (SARS) from a resident to a non-resident. This is a crucial step for individuals who have permanently left or are planning to leave South Africa. Successfully completing this process means you are no longer liable for tax on your worldwide income in South Africa, but only on income sourced from within the country.
It’s important to understand that this is not the same as giving up your citizenship. Tax emigration is purely a tax-related process that ensures your financial affairs are in order and fully compliant with SARS regulations.
How SARS Determines Your Residency
SARS uses two primary tests to determine if you are a South African tax resident. To cease your residency, you must formally apply to SARS and demonstrate that you no longer meet the criteria for either test.
1. The Ordinarily Resident Test
2. The Physical Presence Test
This subjective test looks at where your true “home” is. Factors considered include where your family lives, where your belongings are located, and your general lifestyle and intentions. If you have permanently left the country with no intention of returning, you may no longer be considered ordinarily resident.
This is an objective test based on the number of days you spend in South Africa. To be considered a tax resident under this test, you must be physically present in the country for more than 91 days in the current tax year, more than 91 days in each of the five preceding tax years, and more than 915 days in aggregate over those five preceding years.
The "Deemed Disposal" Rule and Capital Gains Tax
A key part of the tax emigration process is the “deemed disposal” rule. When you cease your tax residency, SARS regards you as having sold all your worldwide assets (excluding immovable property in South Africa) to yourself at market value on the day before you became a non-resident.
This can result in a Capital Gains Tax (CGT) liability, often referred to as an “exit tax.” We help you calculate this liability and ensure all necessary documentation is completed accurately to remain compliant.
Why Professional Guidance is Essential
The tax emigration process can be complex and requires a meticulous approach to avoid future penalties and ensure a smooth transition. Our team of experts at Nuwell Global has extensive experience in navigating the nuances of South African tax law for expats. We provide end-to-end support, from the initial consultation and assessment to the final submission of your application.
