What is tax emigration from South Africa?

Tax emigration is the process of notifying the South African Revenue Service (SARS) that you no longer fall into their exclusive tax jurisdiction and that you wish to change your status from resident to non-resident for tax purposes.

What is tax emigration from South Africa?

Tax emigration is the process of notifying the South African Revenue Service (SARS) that you no longer fall into their exclusive tax jurisdiction and that you wish to change your status from resident to non-resident for tax purposes.

What do expats need to know about South African tax law?

South Africa has a residence-based tax system. As a South African living (or planning to live) abroad, it is necessary to find out if SARS views you as a resident or a non-resident. This will determine whether you will be required to pay tax in South Africa on your worldwide income.

The Income Tax Act defines a resident for tax purposes, and it is important to note that the definition of a ‘resident’ for SARS purposes are not the same as the Department of Home Affairs’ definition of a ‘resident’.

You are a South African tax resident if you meet one of two tests

  • The ordinarily resident test or
  • the physical presence test and
  • you aren’t found to be exclusively a resident of another country for the purposes of the application of any tax treaty.

The ordinarily resident test is conducted first to determine residency. If the answer to this test is negative, only then is the physical presence test applied.

Conducted by SARS, this is a subjective assessment of your intention as the taxpayer to be a resident or not, and the surrounding circumstances that evidence your intention.

You are considered ‘ordinarily resident’ where you have your usual or primary residence – somewhere that can be described as your true home.

This is an objective test because it’s based purely on the number of days you spent with your feet on South African soil during a specific time period. The parameters for this test are set by the South African Income Tax Act.

  • This test is used if you fail to meet the requirements of the ordinarily resident test where, for example, you left South Africa to work abroad with no intention of returning.
  • Only if you meet all the requirements of the test will you be considered a tax resident for that tax year and liable to pay income tax in South Africa on your worldwide income as a result. Even if you no longer consider South Africa your home, SARS still wants your money.

In order to meet the requirements of this test you must be physically present in South Africa for no less than:

  • 91 days in total during the tax year in question
  • 91 days in aggregate during each of the five tax years before that tax year
  • 915 days in aggregate during the five previous tax years.

If you cease to be ordinarily resident and you remain outside of South Africa for a continuous period of at least 330 full days, you will not meet the requirements for tax residency in South Africa.

In other words, you cease your South African tax residency if you no longer meet the requirements of the ordinarily resident or physically present tests.

In most cases, if you leave South Africa with the intention of relocating abroad permanently, you will cease to be a tax resident (in terms of the ordinarily resident test) meaning that you will no longer pay tax in South Africa on worldwide income – only on income from a South African source.

Changing your tax resident status requires approval from SARS. Each case will be evaluated based on its own merits.

You can advise SARS that you no longer meet the requirements for tax residency, in one of two ways:

  1. Through eFiling by noting the date on which you ceased to be a tax resident. Note: Once a case has been created by SARS, you will receive a letter with a request to submit supporting documents.
  2. By capturing the date on which you ceased tax residency on your ITR12 tax return.

To ensure you have all bases covered, you can obtain a “tax residency certificate” from your local tax authority in your new home country verifying your new tax residency status.

This is to let SARS know that the way you are taxed is going to change, moving forward. The year in which you have ceased to be a tax resident may also trigger a deemed capital gains tax disposal, depending on the type of assets you held and where they are located at the time.

  • The ordinarily resident test or
  • the physical presence test and
  • you aren’t found to be exclusively a resident of another country for the purposes of the application of any tax treaty.

The ordinarily resident test is conducted first to determine residency. The physical test is only ever used if the answer to this test is negative.

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