Tax emigration from South Africa is not a simple process so I have put together answers to some of the most common questions I get at Rand Rescue when it comes to tax emigration from South Africa.
Here’s what you need to know about tax emigration from South Africa.
What Is Tax Emigration From South Africa?
Tax emigration is the process by which you change your tax status from resident to non-resident with SARS in order to be considered non-resident for tax purposes.
If you have savings or retirement policies to withdraw under tax emigration, as part of the tax emigration process you would additionally need to apply for an Approved International Transfer from SARS (previously known as an emigration tax clearance). This would then allow you to move funds out of South Africa as part of the tax emigration process.
Most people consider tax emigration when they want to withdraw retirement policies and move those funds overseas.
Others may consider tax emigration so that they are no longer liable for tax in South Africa on their worldwide income.
Completing tax emigration also means that you usually do not have to complete annual tax returns in South Africa and allows you to deregister from SARS completely at the end of the process to ensure all your financial ties with SARS are cut. You cannot however deregister from SARS if you still receive income in South Africa.
Do I Have to Complete Tax Emigration From South Africa If I Live Overseas?
No, you do not have to complete tax emigration just because you now live overseas.
It depends on your current intentions, your future plans, and whether you have any funds or assets left in South Africa.
Tax emigration is designed to help you end your financial ties with South Africa and SARS. If you want to retain assets such as property or policies in South Africa, it can sometimes make your financial affairs more complex if you choose to complete tax emigration.
We highly recommend consulting a trusted tax agent who can review your individual circumstances before making any decisions on whether to complete tax emigration as there is no one size fits all.
Financial Emigration Vs Tax Emigration
Financial emigration was the process before the change in 2021 to tax emigration.
Essentially the process achieves the same thing – ending your financial ties with South Africa – with a few changes to how the process in handled.
Financial emigration was done through the South African Reserve Bank – the SARB. It involved changing your status with the SARB to non-resident for exchange control purposes. Tax emigration is handled completely by SARS now. This changed as of 1 March 2021.
The main reason people completed financial emigration from in the past was to be able to withdraw their retirement funds.
If you are ending your tax residency now to withdraw and transfer your retirement annuity funds, you must prove you have been living outside of South Africa for at least 3 consecutive years prior to application. In the past you could start the process as soon as you had moved overseas and had a tax number in your new home country.
SARS also added a new requirement to the process in 2023 – your tax status with SARS has to be changed from resident to non-resident in order to be considered an emigrant for tax purposes. The paperwork requirement for this is a cease to be resident declaration via an RAV01 form, along with supporting documentation. At the end of the tax emigration process, you are no longer considered a tax resident of South Africa. You can then deregister from SARS once all your returns have been submitted and if you have no more assets in South Africa.
How Does Tax Emigration Affect My Citizenship Status?
It does not, citizenship is completely unrelated to your tax status in South Africa.
Many people mistakenly believe that acquiring citizenship of another country automatically makes them not liable for tax in South Africa. This is not correct. Similarly, ending your tax residency does not change the fact that you are still a SA resident.
How Can SARS Tax Me On My Worldwide Income And Assets If I Don’t Live In South Africa?
South Africa has a residency-based tax system, which means that even if you live outside South Africa, you still need to complete tax returns and pay tax in South Africa.
If you live and earn an income outside South Africa but have not changed your tax status with SARS to non-resident, you will be taxed on your worldwide income over R1.25 million.
Individuals do get a R1.25 million Foreign Employment Income Exemption which is tax-free, but income over this amount will be liable for tax in South Africa.
If you live and earn an income outside South Africa, and you have changed your tax status with SARS to non-resident, you will only pay tax in South Africa on income and assets within South Africa.
Do All Retirement Policies Require Tax Emigration To Withdraw?
No, tax emigration is usually only required to withdraw retirement annuities.
Funds like preservation or provident funds, shares, and unit trusts, can usually be withdrawn in full without having to complete tax emigration. For preservation and provident funds, if you have previously taken a withdrawal, you will usually have to complete tax emigration to withdraw the policy.
I hope this has helped make the process of tax emigration from South Africa clearer for you and answered some of your questions. If you’re still unsure about tax emigration and whether it’s something you could consider, you’re welcome to get in touch with me at reeva.cutting@randgroup.biz and ask away!
Please note this article is not intended as any form of financial or tax advice. For advice relating to your financial investments or tax circumstances, we recommend consulting a registered financial advisor or tax advisor.
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