Prior to the implementation of the Taxation Laws Amendment Act 2020, it was possible to apply to the South African Reserve Bank (SARB) to have one’s status changed from resident to non-resident for exchange control purposes. This was known as financial emigration because the individual formalised their financial exit with SARB. While financial emigration was not required, one of the advantages of changing exchange control status was that the individual could then access and withdraw their South African retirement savings and transfer the proceeds abroad.

South African tax law changed in March 2021, when legislation mandated that the process of formal emigration be phased out. Instead of applying to the South African Reserve Bank to have one’s emigration formalised, tax emigration has since taken its place, with individuals required to meet a number of requirements in order to satisfy the South African Revenue Service (SARS).

Tax emigration from South Africa is the process of notifying SARS that you no longer fall under their exclusive tax jurisdiction and wish to change your tax status from resident to non-resident. You will be expected to pay tax on your worldwide income and asset base as a tax resident, but when you change to a non-resident for tax purposes, you will only be taxed on your South African sourced income and asset base.

So how do you determine your tax status?

Tax residency in South Africa is determined by two tests; the Ordinarily Resident test and the Physical Presence test, conducted by SARS.

The Ordinarily Resident test considers where you keep your assets, where your permanent home is and where your family is based.

The Physical Presence test assesses the amount of time you physically spend in South Africa

There are three ways to change your tax status:

• On the tax return that you submit to SARS

• On the RAV01 form, where SARS will open a portal for you to upload the supporting documents

• The RAV01 is an online form that allows you to make changes to legal entity details at a SARS branch or via eFiling

Everything in life has ramifications, and tax emigration is no exception. Before you decide to pursue tax emigration, you should weigh all the advantages and disadvantages to ensure you’re making the best decision for your financial future. What exactly are we talking about? Of course, there is a Capital Gains Tax. If you are unprepared for this outcome, you may be in for a nasty surprise because the day before you become a non-resident for tax purposes, you will be deemed to have disposed of your worldwide asset base at market value, triggering a Capital Gains Tax (CGT) event, also known as an exit charge. Yes, that is correct. Before you leave, SARS takes one last swipe at your money.

To recap the main differences between tax emigration and financial emigration:

Financial emigration was never required, but tax emigration is required if you want to continue paying the Expat tax in South Africa on your worldwide earnings.

If you plan to cash in your retirement savings and move your money out of South Africa, tax emigration is also required.

Tax emigration, unlike financial emigration, does not provide immediate access to your retirement annuity, and you must maintain your non-tax resident status for a minimum of three years before you can apply for early withdrawal.


For more advice on your move from South Africa, you can contact our expert advisors at www.blacktowerfm.com

This communication is for informational purposes only based on our understanding of current legislation and practices which is subject to change and is not intended to constitute, and should not be construed as, investment advice, investment recommendations or investment research. You should seek advice form a professional adviser before embarking on any financial planning activity. Whilst every effort has been made to ensure the information contained in this communication is correct, we are not responsible for any errors or omissions.