South African tax residency is determined by either the ordinarily resident test or the physical presence test. Ceasing to be a tax resident is a formal process with SARS, and it triggers a deemed disposal of assets known as exit tax.
Emigrating physically does not end your tax residency. Many South Africans abroad remain South African tax residents, taxable on worldwide income, because they never formally ceased residency and did not realise they had to.
Business Requirements at a Glance
Tax residency and ceasing it involve the following.
- The ordinarily resident test, which considers where your permanent home and strongest personal and economic ties are
- The physical presence test, based on days present in South Africa over a prescribed period
- Notifying SARS of the date you ceased to be a tax resident
- A deemed disposal of worldwide assets on the day before ceasing residency, with capital gains tax consequences
- Excluded assets, principally South African immovable property, which remain in the South African tax net
- Supporting documentation evidencing the change in residency
Registration and Legal Requirements
The ordinarily resident test is not about days. It looks at where you would naturally return, your permanent home and your strongest ties, and someone can be ordinarily resident despite spending little time in the country.
The physical presence test applies to people not ordinarily resident and is based on prescribed day counts across several years. Both tests must be considered.
Documents and Ownership Information Required
SARS requires evidence supporting the cessation, which commonly includes proof of a permanent home abroad, evidence of foreign tax residency, employment or business abroad, family location, and the disposal of South African ties.
Keep records of travel dates. Where the physical presence test is relevant, day counts must be evidenced, and reconstructing years of travel from memory is not adequate.
Tax, Licence and Compliance Requirements
Thresholds and rates are set in legislation and revised, commonly with each annual budget. This page does not restate them, because an out-of-date figure would be actively misleading. Confirm the current figures with SARS. The day counts under the physical presence test are prescribed in legislation.
Exit tax is a deemed disposal at market value of your worldwide assets on the day before you cease residency. It can create a substantial liability even where nothing was actually sold, and it needs planning rather than discovery.
The formal exchange control emigration process was replaced some years ago, and the tax residency process now operates through SARS rather than through the previous emigration route. Older guidance describing financial emigration is out of date.
Process, Deadlines and Ongoing Obligations
Deal with the cessation formally and at the right time. Doing it years later means reconstructing evidence and can mean tax returns were filed on the wrong basis in the interim.
Take advice before ceasing residency where you hold significant assets. Exit tax is the part that most often surprises people, and its timing can sometimes be managed.
This page is general information and not legal or tax advice. Confirm current thresholds, rates and requirements with SARS or a registered tax practitioner, since they change with each budget.
Frequently Asked Questions
Does emigrating end my tax residency?
No. Physical emigration does not end tax residency. It must be formally ceased with SARS, and many South Africans abroad remain tax residents without realising it.
What is exit tax?
A deemed disposal of your worldwide assets at market value on the day before ceasing residency, which can create a liability even where nothing was sold.
What are the two residency tests?
The ordinarily resident test, based on your permanent home and strongest ties, and the physical presence test, based on prescribed day counts.
Is financial emigration still a thing?
The former exchange control emigration process was replaced, and the tax residency process now operates through SARS. Older guidance is out of date.
Confirm the current tests, day counts and process with SARS or a registered tax practitioner. This page is general information and not legal or tax advice. Confirm current thresholds, rates and requirements with SARS or a registered tax practitioner, since they change with each budget. Browse all business and compliance requirements.