Tax emigration is the formal processby which you notify the South AfricanRevenue Services (SARS) that you are no longer a South African tax resident. This is distinct from simply applying a double tax treaty (DTA) between South Africa and your new country of residence.

Financial emigration was the process required to financially leave South Africa up to 28 February 2021. That process largely involved the SA Reserve bank and your commercial bankers with only a fairly simple tax clearance letter required from SARS.

Tax emigration was instituted with effect from 1 March 2021. As its name implies it is far more tax focused than the previous dispensation. The SARB and your commercial bankers were excluded from the new process which is now completely managed by SARS.

Anyone who has left South Africa on a permanent basis without an intention to return to South Africa should seriously consider tax emigrating from South Africa. This would exclude South African residents who are temporarily abroad for work, travel or other purposes. For these folk, the terms of the DTA can be applied without having to terminate your relationship with SARS.

The effect of tax emigration is to formally notify SARS that you are no longer tax residentin South Africa. Until such time as you have done this, SARS has a legal right to require you to continue to submit tax returns and to request their share of your worldwide earnings.

Naturally, SARS are boundby the terms of the UK SA Double TaxationAgreement but, even if you don’towe them any tax in terms of that agreement, you will still have to report those earnings to SARS.

Once you have tax emigrated you no longer have to reportand pay tax on your non-SA earnings. However, if you still have earnings in SA you must continue to report and pay tax on those.

SARS will still require you to submit a tax return every year. This return must include information about your worldwide earnings.If you do not submita return, SARS will usually issue monthly administrative penalties for each outstanding return, ranging from R250 to R16,000 depending on your assessed income level.

The Income Tax Act requires you to notify SARS when you cease to be tax resident. This is typically the date when you are no longer ‘ordinarily resident’ or meet the physical presence test for ceasing residency. These two tests are independent - failing either one may trigger a cessation of tax residency under South African law.

In practice, it is best to begin the processonce you have passed your first tax year end in the UK.

There is no requirement to tax emigrate on the same date as you physically emigrate. Whilst it is easier from a documentation perspective it may not be relevant to your personalcircumstances and should be discussed with a professional cross border tax advisor.

You do not need to delay the tax emigration process until you have permanent residence in the UK. It can be done at any time. This is primarily guided by your intention regarding the future. If that is to remain permanently out of SouthAfrica, then you should tax emigrate as soon as practically possible.

From a tax perspective there are 2 tax events you should be aware of.

Firstly, your tax year is split by the date on which you tax emigrate. This has 2 effects:

1. Your primary rebate is reduced by the pro-rata period for which you were not in the country; and

2. You have to complete 2 tax returns; one for the pre-emigration period and one for the post-emigration part of the year.

Secondly, you need to include a Capital GainsTax section in your tax return for the period ending on the date you cease tax residency.

· SARS tax returns

If you continue to receive income in South Africa you will need to continue filing tax returns. The tax return for non-residents is different to the return for residents.

· Bank accounts

Once you have tax emigrated you need to notify your commercial bankers.Your bank will then convert your existing account to a non-resident account. These accounts are not as restricted as the old “blocked rand accounts”. You can continue to receive money into this account, and you can spend the funds in South Africa or transfer funds overseas from the account. Please note that funds in a non-resident account are not freely transferable overseas but the restrictions are not prohibitive. You will need to notify the bank of the source of the funds and provide either a SARS “Good Standing Tax Clearance Certificate” or an “Approval for International Transfer” certificate.

· Insurance policies

Tax emigration has no impact on your insurance policies. You can continue to pay premiums from your non-resident account or you can make the policies paid up.

· Retirement policies

Tax emigration has no impact on your retirement policies. You can continue to pay premiums from your non-resident account or you can make the policies paid up. Once you have been tax emigrated for 3 years you can withdraw 100% of the value of the funds subject to the normal tax rules. Consult both your broker and a skilled tax advisor BEFORE making this decision.

· Living Annuities

Living Annuities are different from Retirement Annuities and Pension Funds.They cannot be cancelled, surrendered or cashed out even if you tax emigratefrom South Africa.The only exception to this is once the capital in the fund falls below R75,000. In this case the policy can be paid out in full.

· Other assets

Tax emigration has no impact on your other assets – you can continue to deal with them as you wish.

· Bonds

Subject to your commercial banker’s approval, you can continue to have a mortgage bond over any fixed property you have in South Africa.If you choose to buy a new property once you have emigrated you are also permitted to raise a bond to help satisfy the purchase price. Obviously normal credit vetting will occur.

· Overdrafts

Non-resident Rand accounts may not be overdrawn without the permission of the SA Reserve Bank.

· Credit cards

Current SARB guidelines allow the continued use of South African issued debit and credit cards “provided that the expenditure is settled in foreign currency or Rand from a Non-resident Rand account in the name of the non-resident and/orRand from a vostro account held in the books of the Authorised Dealer.”

“Exit Tax” is the informal term used to describe the Capital Gains Tax (CGT) triggered when an individual ceases to be a South African tax resident. This is a deemed disposal for CGT purposes - not a physical sale - and must be included in your final South African tax return covering the year in which you cease tax residency.

At the point of ceasing residency, SARS treats most of your worldwide assets as if they were sold at market value on the day before you become a non-resident. This triggers CGT on the unrealised gain up to that date. No actual money changes hands, but the tax becomes payable as if the gains were realised.

This includes all foreign assets - including foreign immovable property (fixed property). So, if you own a holiday home or rental property abroad, you will be taxed on the increase in value up to the date of your emigration. After ceasing tax residency, any further growth in your foreign assets (including that property) is not subject to South African CGT.

However, certain South African assets are excluded from the deemed disposal and exit tax:

· Immovable property located in South Africa

· Assets of a permanent establishment (e.g., a branch) in South Africa

· Retirement fund interests, where relevant (based on timing and legislation)

These excluded assets remain subject to South African CGT when they are eventually sold - and the full gain from acquisition to disposal will be taxable in South Africa.

Some indirect holdings (e.g. shares in a company whose value is primarily derived from South African immovable property) may also be treated as immovable property and taxed accordingly on future disposal.

Finally, your residency cessation date is determined either by ceasing to be ordinarily resident in South Africa or by failing the physical presence test, as defined in South African tax legislation. Once you meet the requirements for non-residency, the Exit Tax becomes due and reportable in that tax year.

No. Most jurisdictions, including the UK, do not recognise this Exit Tax for offset purposes. It is considered a final South African tax liability and does not adjust the base cost of your assets for capital gains tax in your new country.

In the year you tax emigrate you will need to complete 2 tax returns – one for pre-emigration and one for post-emigration

If you still have income in South Africa you will still need to complete SARS tax returns. This return is different from the one completed by SA tax residents.

Subsequent to the year of your tax emigration, if you don’t have any SA income you do not need to complete a return.

Tax emigration ends your obligation to report worldwide income to SARS, but you must still declare any South African-sourced income - such as director’s fees, dividends, interest, rental income, or consulting payments.

This income remains fully taxable in South Africa and must be reported via a non-resident tax return. PAYE or withholding tax may apply, depending on the income type.

Make sure your South African company or employer is aware of your non-resident status, as this affects how the income is taxed and reported. While Double Tax Treaties can reduce or eliminate SA tax, the relief must be correctly applied.

SARS may treat non-executive director’s fees as employment income subject to PAYE, even for non-residents, although this is contested in some jurisdictions. In some cases, treaty relief may apply, but only if all compliance steps are followed. Specialist advice is strongly recommended.

Tax emigration is the process of notifying SARS that you are no longer tax resident in South Africa. This is a process that every emigrant should undertake.

Approval for International Transfer (AIT) is a separate application used to

· authorise the transfer of substantial funds out of South Africa(either before or after emigration); and

· to obtain authorisation for the withdrawal of 100% of any retirement funds you may have in South Africa. It is important to note that this is only the 1st step in that process and the remaining steps are crucial to minimising your overall tax cost of withdrawing those funds.

It is important to note that an AIT is only valid for 12 months whereafter a new application has to be submitted. By contrast tax emigration is a once off process.

The “Approval for International Transfer” (AIT) is simply a consolidation of application forms at SARS. Prior to the release of this, if you were a South African resident wanting to move funds/assets in excess of R1m overseas then you would complete a “Foreign Investment Allowance” (FIA) application. If you were not a South African tax resident you would complete an “Emigration Tax Clearance Status” (ETCS)application. Both applications required the same information and led to the same end result so the new AIT application replaces both the FIA and ETCS applications.

In all likelihood, SARS will be applying monthly non-filing penalties to your account.These are charged monthly for each tax return that is outstanding. Additionally, an application for tax emigration or AIT will be rejected by SARS if there are outstanding tax returns and/or monies.

Yes. Like any debt, emigration does not expunge the debt. It remains due and payable and will be subject to an interest charge until it is settled.

It is very easy to reverse the process and be registered as a SouthAfrican taxpayer once again. It’s important to note that SARS is tightening up on returning residents. They are now tracking the reinstatement of tax residency. If you previously ceased South African tax residency and return to the country, even temporarily, you now must declare the date your residency resumed.

In addition:

· SARS is matching income from global sources under international data-sharing agreements.

· The updated eFiling system includes new forms and questionnaires based on your tax residency.

· If you haven’t formally ceased your tax residency with SARS, you are still considered a resident and are taxable on your worldwide income, regardless of where you live.

If this applies to you - or if you’re unsure - please get in touch.

Surprisingly formal tax emigration makes it easier to get your cash and/or shares inheritance out of South Africa. Once you have your “Notice of Non-resident Tax Status” letter the executors of the estate and the estate’s commercial bankers can release the funds and/or shares to you overseas.

You will also need to supply the commercial banker with the final Liquidation and Distribution account showing the Master of the High Court’s reference number to prove beneficial entitlement.

As many executors do not deal with estates that have non-resident beneficiaries, they are often unfamiliar with the requirements on them and that leads to them delaying the process. In this regard we have EXCELLENT contacts whose sole task is to wind up deceasedestates quickly and efficiently.

Yes, although distributions are permitted, SARS and SARB require documentary compliance including the Notice of Non-resident Tax Status and trust resolutions. Delays often arise because trustees or banks are unfamiliar with non-resident compliance requirements.

From 1 March 2024, SARS amended the Income Tax Act to restrict the ‘flow-through’ principle to resident beneficiaries only. As a result, any income (e.g. interest, dividends, rent) vested in a non‑resident beneficiary is no longer taxed in their hands but becomes taxable in the trust at a flat rate of 45%.

This change aligns the tax treatment of income with that of capital gains, which has always been taxed within the trust when flowing to non-resident beneficiaries. In practical terms, trustees vesting income in non-resident beneficiaries must withhold 45% tax at trust level before distributing funds abroad

Tax emigration from South Africa generally simplifies your international tax affairs. While you remain a South African tax resident, you are required to file tax returns in both South Africa and your new country of residence. This often involves applying double tax treaty reliefs and claiming foreign tax credits, which can be complex and administratively burdensome.

By formally tax emigrating, you cease to be taxed in South Africa on your worldwide income. This means that, going forward, you will usually only need to file tax returns in your new country of residence - provided you no longer receive income from South Africa. If you do continue to receive SA-sourced income (such as rental income or dividends), you may still need to file a non-resident return with SARS, but your international earnings will no longer be reportable in South Africa.

In most countries, any tax previously paid to SARS on South African income can be credited against local tax liabilities under the applicable Double Taxation Agreement (DTA), helping to prevent double taxation. However, these DTAs differ from country to country, and it’s important to ensure that the correct treaty provisions are applied and documented properly.

South Africa currently has tax treaties with more than 70 countries, although some are outdated or have limited application. The benefits and obligations under each DTA can vary widely, so it is essential to obtain cross-border tax advice tailored to your personal circumstances.

Need help? If you’re unsure about any aspect of tax emigration or cross-border tax compliance, please contact our specialist team. We’ll help you plan, file, and stay compliant—every step of the way.