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If you are planning to work or settle outside of South Africa or have already done so, this guide from Sable International’s South African Tax Director, William Louw, will ensure you can navigate the tax system – at home and abroad.
In a world where individuals may hold assets in multiple countries, those with ties to South Africa need to know whether or not they are tax residents in South Africa. Keeping or breaking your tax residency will determine what tax you pay, when and where.
What is the difference between South African expats and tax non-residents?
The South African tax system is residency-based. Your tax residency is determined by several factors, including where you spend most of your time and your ties to SA. You can be physically located outside the country and still be considered a South African tax resident.
| South African tax non-residents are individuals who: | South African expats are individuals who: |
| Have severed ties with SARS | Are tax residents temporarily abroad who have not yet severed tax ties with South Africa |
| No longer meet the requirements for tax residency | Meet the requirements for tax residency |
| Have completed the formal procedures required to change their status to tax non-resident | Have not completed the formal procedures required to change their status to tax non-resident (“tax emigration”) |
| Will no longer be taxed on their worldwide income (will only be taxed on income earned in South Africa) | Are required to declare their worldwide income which includes foreign employment income and pay any applicable tax (“expat tax”) |
What is expat tax?
South African tax residents living and working abroad are only exempt from paying SA tax on foreign employment earnings up to R1.25 million*. Anything over and above this amount will be taxed in SA, known as “expat tax”.
To qualify for this exemption, you must:
- Have spent more than 183 days outside South Africa in any 12-month period (of which 60 days must have been spent continuously outside South Africa)
- Be an employee earning a salary
Employment income earned from duties performed in South Africa and earnings that exceed the exemption are taxed according to the normal tax guidelines.
*Includes allowances, bonuses and fringe benefits, among others.
How am I affected by South African exchange control?
South African citizens who have lived abroad but have not officially tax emigrated are still considered residents in South Africa for exchange control purposes and are entitled to move R1 million out of South Africa per calendar year without tax clearance. This is known as your single discretionary allowance – or SDA.
To send more than R1 million abroad, you need an AIT (Approval for International Transfer) from SARS. This certificate is valid for 12 months and allows you to transfer up to R10 million using your South African foreign investment allowance.
Once you have formally tax emigrated, your discretionary allowance will be unavailable unless you return as a South African tax resident. You must apply for an AIT to move funds out of the country.
When should I inform SARS that I am leaving South Africa?
If you have not yet left and are planning to leave the country, it is in your best interest to gather evidence of your intention to settle in another country, as you will need to prove to SARS that your ultimate goal is to leave South Africa permanently. You cannot prove this on your departure day, but you should do so before your next tax return. This way, you can check whether you can make the other country your residence before informing SARS.
The non-residence letter from SARS proves that SARS agrees that you are no longer a tax resident in South Africa. To apply for the non-residence letter, you must complete the relevant forms, provide supporting documents, and declare all your assets and liabilities. Our tax practitioners at Sable International specialise in cross-border cases and can ensure that you submit all the required documentation and that the application process goes smoothly.
How do I know if my South African tax number is active?
If you have resided outside South Africa for over 10 years, your tax number is usually inactive. To determine if your South African tax number is still active, you can follow these simple steps:
- Use the SARS eFiling platform – Log in to your account and go to the “Taxpayer Details” section. Here you should be able to find information about the status of your tax number. You can be sure your tax number is valid if it is active.
- Consult your tax certificates – Your tax number is usually shown on any certificates you receive, such as an IRP5. If your tax number is shown, it means that your tax number is active.
- Review communication from SARS – If you have recently received a communication from SARS, such as a tax return confirmation or a tax notice, check if your tax number is mentioned in these documents. This is an indicator of its active status.
To be on the safe side, keep proof of your tax residency in your new country in case SARS requires evidence at a later date.
What if I don’t know my tax number?
If you lose your tax number after you have left the country, you could find yourself in a tricky situation. SARS can only send you your tax number if you can access your email address and South African phone number.
Note: If you lose access to these communication methods and do not know your tax number, you’ll have no way to correspond with SARS, as they have made it impossible to retrieve this information. As such, you will likely be unable to move funds out of South Africa.
We recommend that you change your details with SARS before you leave the country and provide a South African contact number that you can still access after you leave. Consider using the phone number of a relative in the country until SARS finds a solution to this problem and makes it easier for expat SA taxpayers. Additionally, make sure that your email address is updated and is one that you will still have access to after you leave.
Sable International can assist you with changing your tax status and making sure your tax affairs are in order with SARS. For peace of mind regarding your South African tax affairs, contact our South African tax team at [email protected] or by calling +27 (0) 21 657 1517.
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