Africa-Press – South-Africa. Many South Africans living abroad mistakenly believe they no longer have to pay tax to SARS, but unless they formally cease their tax residency, they remain liable for worldwide income tax.
Mbalenhle Mahlaba, Expatriate Tax Specialist at Tax Consulting SA, explained that SARS is sharpening its focus on South African expatriate taxpayers as part of efforts to curb non-compliance.
Previously, SARS has estimated that South Africa has an R800 billion “tax gap”, the difference between the total amount of taxes taxpayers are legally obliged to pay and the amount paid on time.
This amount comprises unpaid excise duties, illicit trade flows, unpaid VAT, aggressive tax planning and uncollected debt.
In 2025, SARS is better equipped than ever before to clamp down on this non-compliance, and South Africans living overseas are not out of the woods.
“Recent enhancements to SARS’ systems and record-keeping around tax residency status send a clear message to South Africans living and working abroad to ensure their tax affairs are in order according to the residency status SARS has on record,” Mahlaba said.
“If you have not formally changed your tax residency status to that of a non-resident taxpayer, SARS will continue to treat you as a tax resident, meaning you will be taxed on your worldwide income, not just income sourced in South Africa.”
For South Africans who have relocated or are planning to move abroad, ceasing tax residency is critical. It may sound simple enough, but for many, this process causes confusion about when, how and why.
“Many South Africans living abroad assume that simply leaving the country breaks their tax ties. However, SARS operates on legal requirements, not assumptions,” she said.
“Unless you have formally ceased tax residency, you remain a South African tax resident.” South Africans who are overseas and want to protect their worldwide income from being taxed by SARS should consider one of the following:
Permanent cessation of tax residency through Financial Emigration
Temporary cessation under a Double Tax Agreement (DTA)
Use Section 10(1)(o)(ii) Exemption in the Income Tax Act (commonly referred to as the foreign income exemption).
These options apply in different contexts, Mahlaba said. “For those who left years ago, it may even be a question of ‘if’ they have formally ceased tax residency.”
They may be under the impression that they are automatically off the SARS radar after many years of absence from South Africa.
“This is not the case if you have not followed the formal process, and the sooner you formalise your tax affairs, the better,” she said.
Financial emigration
Mahlaba explained that physical emigration from South Africa does not equal financial emigration. Financial emigration signals a permanent break from South African tax residency.
It involves a person formally applying to SARS that they no longer regard South Africa as their ordinary place of residence.
“SARS applies the ‘ordinarily resident’ test first. If South Africa is no longer the place to which you normally return, you may be seen as a non-resident,” she said.
The application requires documentation as evidence of their permanent intention to leave South Africa.
“This is an ideal option for South Africans who do not have the intention of returning to the country and no longer have strong local family or economic ties,” she said.
Mahlaba explained that when SARS applies the physical presence test, they consider the number of days a natural person is present in South Africa during a year of assessment.
They also consider how long the person was in South Africa during the five years of assessment before the year of assessment.
The person will be considered a South African tax resident if:
They were present for 91 days in total during the year of assessment
They were present for more than 91 days in total during each of the five years preceding the assessment year
They were present for more than 915 days in total over those five preceding years
“Taxpayers often confuse the days requirement of the physical presence test with the foreign income exemption,” Mahlaba said.
“The Section 10(1)(o)(ii) Exemption in the Income Tax Act – often referred to as expat exemption – has different legislative requirements than the physical presence.”
It concerns days spent outside of South Africa and the threshold before foreign earnings are taxed. A tax resident’s first R1.25 million of foreign employment income will qualify for exemption.
Any amount above this will be subject to marginal tax rates in South Africa. However, requirements about days spent outside South Africa and proof of an employment relationship must be met before this exemption can be applied.
“Residents working abroad temporarily and those not yet ready to cease tax residency can use this provision for tax relief purposes,” Mahlaba said. However, she advised that they get guidance from a cross-border tax specialist.
Double Taxation Agreement
According to Mahlaba, it is a common misconception that expat exemption and tax relief under a DTA are the same. In reality, the two serve different purposes in tax law.
“A DTA is an international treaty between two countries, designed to avoid double taxation of income,” she said. “The agreement specifies which country’s tax authority holds the right to tax you on your earnings.”
“In other words, where you are a tax resident in one country and earning income in another, a DTA will determine taxing rights between the two countries concerned.”
Mahlaba explained that a DTA ensures limited exemption from South African tax on foreign employment income.
“This applies when an individual remains a South African tax resident but earns income from employment rendered outside South Africa, like individuals on foreign work assignments or secondments.”
In these cases, expatriates can cease tax residency short-term to protect their worldwide income from being taxed in South Africa, as opposed to the formal financial emigration process, which is a permanent cessation.
“Having a DTA in place between South Africa and the country you find yourself in does not automatically trigger tax relief,” Mahlaba warned.
A DTA residency declaration must first be submitted and approved by SARS. This must be proved annually so that they can still qualify for the relief.
“Tax residency is not just a box-ticking exercise. It affects how much tax you pay, where you pay it, and how your offshore assets and income are treated,” she added.
For More News And Analysis About South-Africa Follow Africa-Press
