Tax residency when you leave South Africa

South African tax residents are taxed on worldwide income; non-residents only on income sourced in South Africa. If you leave South Africa, whether your tax status actually changes with you depends on more than your address.

Are you still a South African tax resident?

You’re “ordinarily resident” in South Africa if it is the country you would, naturally and as a matter of course, return to after your travels — in other words, your real home. You can remain ordinarily resident for tax purposes even after leaving for a long period, if you still intend to come back.

If you’re not ordinarily resident, SARS applies a separate “physical presence” test:

1. 1More than 91 days in South Africa in the current tax year, and each of the preceding five tax years, or
2. 2More than 915 days in South Africa in total across the preceding five tax years.

Meeting either test on its own is enough to make you a tax resident for that year, regardless of where you consider home to be.

What changes if you formally cease tax residency

If you don’t inform SARS of a genuine change in residency, SARS is entitled to continue treating you as a resident and taxing your worldwide income — which can mean the same income being taxed twice, in South Africa and in your new country. Formally ceasing tax residency (often called “tax emigration”) means notifying SARS and providing supporting documentation.

When you break tax residency, SARS treats you as having disposed of your worldwide assets — excluding South African immovable property and retirement fund savings — and taxes any resulting capital gain. This “exit tax” is, in effect, SARS collecting the tax it would otherwise have received had you stayed.

What it means for your retirement savings

Retirement annuities, living annuities and endowments generally remain taxable in South Africa, though the applicable double taxation agreement (DTA) between South Africa and your new country determines which country actually has the taxing right — living annuity income, for instance, can be exempt from South African PAYE if your new country’s DTA provides for it, though you’d need a tax directive from SARS to give effect to that.

If you plan to access a retirement annuity after leaving, you’ll need to show you’ve been a tax resident of another country for three consecutive years — SARS will not release the funds while its own systems still show you as a South African tax resident.

This article is general information and not advice. Silke Financial Services is an Authorised Financial Services Provider, FSP No. 12462.