Tax emigration explained: What every South African moving abroad needs to know

Key insights: Understanding tax emigration in South Africa

• Tax emigration from South Africa isn’t triggered by your flight, visa, foreign address, or first overseas salary. Your personal circumstances determine whether you cease being a South African tax resident.
• SARS uses three qualifying bases to determine tax residency: the ordinarily resident test, the physical presence test, and the relevant Double Tax Agreements.
• Ceasing tax residency triggers a deemed disposal under Section 9H of the Income Tax Act - a notional disposal of certain worldwide assets at market value. This can result in Capital Gains Tax even if you haven’t sold the assets, making your effective cessation date financially important.
• Once you become a SARS non-resident, different exchange control rules apply to your South African capital and how you can transfer it offshore.
• Future Forex coordinates your tax declaration, AIT, documentation, and currency conversion in a single, seamless process.

Moving abroad comes with no shortage of important dates. There’s your last day at work, the handover of your keys, the day you board the flight and, eventually, your first overseas salary. Each marks another step in the move and, at the time, can feel like the date that matters most.

When it comes to your finances, though, there’s another date that deserves your attention: the day you cease to be a South African tax resident. This isn’t simply the day you leave the country, and it can have a significant impact on your tax obligations, your assets and your finances once you’re living abroad.

Alongside the residency question, there's also the terminology to navigate. You may still come across the term “financial emigration” when researching how to move your finances abroad. The term refers to the former SARB-administered exchange control process, which was phased out in March 2021. It's since been replaced by tax emigration - a process centred on whether an individual has ceased to be a South African tax resident.

How does SARS determine your South African tax residency status?

South African tax residents are generally taxed on their worldwide income, while non-residents are taxed only on income from South African sources. Your tax residency status can therefore affect how your foreign income and investments are treated, what you need to declare on future tax returns and what compliance is required when you need to move significant capital offshore.

Moving overseas doesn’t automatically make you a non-resident for South African tax purposes. You can be living and working in another country and still be regarded as a South African tax resident by SARS. A foreign work permit, permanent residency or citizenship may support your case, but none of these determines your tax residency on its own. The same goes for selling your South African home, transferring your savings abroad or closing a local bank account.

That’s why getting your tax residency cessation date right matters. It needs to reflect when you genuinely ceased to be a South African tax resident and be supported by the facts. Trying to backdate the date without sufficient evidence can create complications with SARS and, later, when you need to transfer capital offshore.

SARS determines your tax residency status using three qualifying bases:

• The ordinarily resident test: where is your real, permanent home, and where do you naturally intend to return?
• The physical presence test: how many days have you spent in South Africa over the prescribed counting periods?
• A Double Tax Agreement (DTA): where both countries initially treat you as a resident, the relevant DTA may assign exclusive tax residency to one country.

If the physical presence test applies to you, and you’re not ordinarily resident in South Africa, you’ll generally cease to be tax resident once you have been outside the country for 330 continuous full days. The ordinarily resident test, however, requires a broader assessment. It considers your overall circumstances, your ties to South Africa and where you genuinely intend to make your home. In these cases, a day count alone isn’t enough to determine your tax residency.

How do you cease tax residency in South Africa?

The process starts on SARS eFiling, where you must update your Income Tax Liability Details on the RAV01 form and enter the date on which you ceased to be a South African tax resident. SARS will then open a case and request supporting documentation to substantiate your position. Depending on your circumstances, this may include:

• A signed declaration explaining the basis of non-residency
• A detailed motivation letter
• Passport and travel-history records
• Proof of a foreign visa or right of residence
• A foreign tax-residency certificate
• Details of family, property, investments and business interests
• Information about visits and continuing connections to South Africa

SARS may raise additional queries before confirming your cessation date. The strongest applications are those where the date is clearly supported, and the documentation presents a consistent picture of your circumstances.

The evidence required can also vary depending on the basis for your non-residency: the ordinarily resident test generally calls for a more comprehensive assessment of your personal and financial ties, while the physical presence test is primarily determined by your travel history and the number of days spent in South Africa. 

Exit tax in South Africa: How the deemed disposal is calculated

This is where the date you cease tax residency can start to have a real financial impact. When you cease to be a South African tax resident, Section 9H of the Income Tax Act treats you as having disposed of certain worldwide assets at market value. That deemed disposal can trigger Capital Gains Tax (CGT), commonly referred to as “exit tax”, even if you haven’t actually sold anything.

For individuals, 40% of a capital gain is included in taxable income and taxed at your marginal rate. In practice, this means the effective CGT rate can range from 7.2% to 18%, depending on your taxable income.

So, your cessation date is more than just an administrative detail. It marks the point at which your tax treatment changes and can affect the income and gains you’re liable for in that tax year. Getting the date wrong, or backdating it without considering the consequences, can create unexpected tax complications later on.

Transferring money offshore after ceasing tax residency

Being recognised as a SARS non-resident doesn’t automatically give your South African bank the green light to transfer your funds abroad whenever you choose - you’ll still need to meet the relevant SARS and exchange control requirements before transferring capital out of South Africa.

The requirements that apply to your offshore transfers also change once you cease to be a South African tax resident. As a tax resident, you can use the Single Discretionary Allowance (SDA) to transfer up to R2 million per calendar year without an AIT, and a further R10 million under the Foreign Investment Allowance (FIA) with an AIT. Once you become a non-resident, these resident allowances no longer apply and your transfers are generally handled through the non-resident route.

Depending on the transfer, as a non-resident you may need:

• Proof of the source of funds
• An Approval for International Transfer (AIT) from SARS
• Evidence of your non-resident status
• Asset and liability information
• The correct Balance of Payments (BoP) reporting category
• Additional SARB approval for amounts outside standard permissions

This is why it’s important to plan your tax emigration and international transfers together. Preparing your residency declaration, AIT application and supporting documents in advance, and considering your currency conversion early, can help avoid delays and rushed decisions. It also gives you more flexibility if a payment deadline is approaching, rather than having to convert a significant amount at whatever exchange rate is available at the time.

Navigate tax emigration and offshore transfers with expert guidance

Tax emigration is rarely as simple as updating a form on SARS eFiling. Your residency declaration, AIT application, source-of-funds documentation and currency conversion all involve different requirements and timelines, and coordinating them can be challenging.

At Future Forex, we simplify the process, helping you navigate the documentation, SARS requirements and international transfer requirements involved in ceasing your South African tax residency and moving your funds offshore.

Contact one of our experts today to make your tax emigration and international transfer as seamless as possible.