Living abroad does not exempt South Africans from their tax and financial responsibilities in South Africa. Whether you have permanently relocated or are working overseas temporarily, understanding your tax and financial obligations can help you avoid penalties and ensure compliance with South African regulations. Here’s what you need to know about tax, financial commitments, and how Apostil.co.za can assist with document processing.
Tax residency and worldwide income
The South African Revenue Service (SARS) follows a residency-based tax system, meaning that South African tax residents must declare their worldwide income. However, if you are classified as a non-resident for tax purposes, you will only be taxed on income sourced in South Africa.
Determining tax residency
Your tax residency status is determined by:
- The Ordinary Residence Test – If South Africa is your permanent home, you may still be considered a tax resident.
- The Physical Presence Test – If you have spent a certain amount of time in South Africa over the last five years, you may be deemed a tax resident.
- Double Taxation Agreements (DTAs) – If you live in a country with a DTA with South Africa, you may be exempt from paying tax twice on the same income.
If you are unsure of your tax residency status, consulting a tax professional can help clarify your obligations.
Expat tax and foreign income exemption
South African tax residents earning income abroad may be subject to expat tax. However, they can apply for the Foreign Employment Income Exemption (Section 10(1)(o)(ii)), which allows up to R1.25 million of foreign income to be tax-free, provided they meet the requirement of working outside South Africa for at least 183 days in a 12-month period (including 60 consecutive days).
If your income exceeds this threshold, you may be liable for tax in South Africa on the amount exceeding R1.25 million.
Capital gains tax and property ownership
If you own property in South Africa, you may be liable for Capital Gains Tax (CGT) when selling it. SARS taxes non-residents on capital gains from fixed property in South Africa, so it’s essential to plan for potential tax obligations when selling an asset.
Additionally, rental income earned from South African property is taxable, and you may be required to submit tax returns annually.
Retirement funds and financial accounts
Many South Africans abroad maintain retirement annuities or bank accounts in South Africa. Key considerations include:
- Retirement annuities (RA) – You cannot access your RA before the age of 55 unless you have formally emigrated through the South African Reserve Bank (SARB).
- Bank accounts – Exchange control regulations may affect your ability to transfer funds out of South Africa. If you need to move money internationally, ensure compliance with financial regulations.
Financial emigration vs. tax emigration
There is a difference between financial emigration and tax emigration:
- Financial emigration (previously handled by SARB) was the process of formalising non-residency status for exchange control purposes. However, this was phased out in 2021.
- Tax emigration involves notifying SARS that you are no longer a South African tax resident. This process requires submitting an application and supporting documents to SARS.
Need assistance with tax-related documentation?
Managing tax and financial matters from abroad can be complex, especially when dealing with SARS and other financial institutions. Apostil.co.za can assist with obtaining and legalising tax clearance certificates, power of attorney documents, and other paperwork needed for tax emigration, property transactions, and financial matters. Contact us today to simplify the process.