SARS Tax Emigration: Cessation of SA Tax Residency
South Africa taxes residents on worldwide income (residence-based taxation). Ceasing SA tax residency requires a formal process with SARS. Two tests determine SA tax residency: (1) Ordinarily resident test: if you regard South Africa as your permanent home ('where you naturally return when you wander'), you are SA tax resident regardless of time abroad. Ceasing ordinary residence: physically leave SA with the intention of not returning permanently; change your domicile to another country. (2) Physical presence test: you are SA tax resident if you are physically present in SA for ≥91 days in total during each of the current year and each of the preceding 5 years, AND ≥915 days in total during those 5 preceding years. Formal tax emigration: SARS requires you to complete the formal process via eFiling (sars.gov.za). File a Notification of Emigration, submit supporting documentation (proof of foreign domicile, lease/purchase of overseas property, foreign employment contract, etc.). SARS issues a letter confirming your non-residency date. Deemed disposal: on the date you cease SA tax residency, all your worldwide assets (except SA real property and SA business assets) are deemed disposed of at FMV. Capital gains tax applies at the inclusion rate of 40% (individuals) × marginal income tax rate (up to 45%) = effective max CGT rate of 18%. Annual exclusion: R40,000 (2025).
Retirement Annuity (RA) 3-Year Lock-Up on Tax Emigration
South African Retirement Annuities (RAs) are regulated under the Pension Funds Act. Historically: you could withdraw your RA balance on formal tax emigration. The 2021 amendment introduced a 3-year waiting period: from the date SARS confirms your tax emigration, you must wait 3 years before you can access (withdraw) your RA funds. This 3-year rule was effective from 1 March 2021. Before the 3-year rule: it was possible to emigrate and immediately withdraw RA funds (subject to the 'first R25,000 tax-free; balance taxed at sliding scale' rules). After 3 years: you can apply to withdraw the RA. Tax on withdrawal (once permitted): RA withdrawals are taxed at a sliding scale: first R550,000 (2025): 0%; R550,001–R770,000: 18%; R770,001–R1,155,000: 27%; above R1,155,000: 36%. Strategic consideration: given the 3-year lock-up, early RA withdrawals are not possible — plan accordingly. Some former residents who emigrated before March 2021 retained the right to access their RA sooner. Preservation funds and pension fund benefits: similar 3-year rules now apply. Living annuities: if you have already converted an RA to a living annuity, different rules apply — living annuity income can be remitted abroad.
Exchange Control: Moving Capital Out of South Africa
South Africa's South African Reserve Bank (SARB) controls the movement of capital out of South Africa. Exchange control rules affect how much you can transfer abroad and through what process. Allowances for tax emigrants: (1) Single discretionary allowance: all SA adults may transfer up to R1,000,000 per calendar year abroad without tax clearance (this is available to residents and non-residents). (2) Foreign investment allowance (for tax emigrants): on formal SARS tax emigration, you can apply for an additional foreign investment allowance — currently up to R10,000,000 per person per year with a SARS tax clearance certificate (Good Standing). Above R10M: application required to SARB. (3) Non-residents: once confirmed as non-resident by SARS, capital held in South Africa can be freely remitted abroad via an 'emigrant capital account' through an authorised dealer (South African bank). Practical process: open a South African bank emigrant account, transfer funds into it, then remit internationally via authorised dealer (FNB, Standard Bank, Absa, Nedbank, etc.). The tax clearance certificate (from SARS via eFiling) confirms no outstanding SA tax obligations and is required for large transfers. Pension fund proceeds, RA withdrawals, and investment proceeds can all be transferred via this process once applicable lock-up periods expire.
Section 10(1)(o)(ii): The 2020 SA Expat Tax Change
Prior to March 1, 2020, South African tax residents working abroad for ≥183 days per year (60+ consecutive days) were fully exempt from SA income tax on foreign employment income. This was the 'expat tax exemption.' From March 1, 2020: the exemption was limited. SA tax residents working abroad now pay SA income tax on foreign employment income exceeding R1,250,000 per year. Below R1.25M: still fully exempt. Above R1.25M: SA income tax applies to the excess, with a foreign tax credit for taxes paid in the country of employment. This primarily affects SA nationals on high-earning assignments in the UAE (where there is no income tax), Qatar, Saudi Arabia, and other Gulf states — where no foreign tax credit is available. For SA nationals who have completed formal tax emigration (confirmed non-residents): Section 10(1)(o)(ii) does not apply — they are not SA tax residents. The 2020 change only affects continuing SA tax residents who live and work abroad without completing formal tax emigration. Key message: SA nationals working in the UAE or Gulf without completing tax emigration may owe SA income tax on their foreign income above R1.25M.
Final SARS Return and Non-Resident SA Income Tax
Final SARS income tax return: file for the SA tax year in which you cease residency (SA tax year runs March 1 to February 28/29). Your final return covers March 1 to your cessation of residency date — worldwide income for that period. Include deemed disposal capital gains on the return. File via eFiling (sars.gov.za). SARS assessment: expect SARS to scrutinise the deemed disposal carefully. Engage a registered tax practitioner (RTP) for the final return if you have significant assets. After tax emigration as a non-resident: SARS taxes you only on SA-source income: (1) SA rental income: taxable in SA; (2) Dividends from SA companies: 20% Dividends Tax (withheld at source); (3) SA-source interest: 15% withholding tax for non-residents; (4) CGT on SA real property: if you sell a South African property as a non-resident, the buyer withholds 7.5% (individuals), 10% (companies), or 15% (trusts) of the gross proceeds as withholding tax — this is provisional and you file a non-resident return to confirm the final CGT. These withholding taxes are final taxes for most non-residents — under the applicable DTA (South Africa-USA, SA-UK, SA-Australia, etc.), the residence country may tax the income and provide a FTC for SA withholding.