South Africans continue to emigrate in significant numbers each year, pursuing new opportunities abroad. But while the destination may be an appealing career move and the scenery alluring, an important question to consider is whether the country of choice is also a wise destination for tax purposes.
John-Paul Fraser
Team Lead: Cross-Border Taxation
Vivian Cox
Expatriate Tax Consultant
Whether packing for Plymouth or Perth, many expatriates discover too late that leaving South Africa does not automatically mean leaving the South African tax net. This is one of the most common and costly traps facing expatriates.
Popular Destinations among South Africans
The United Kingdom (UK) and Australia remain among the most popular destinations for South Africans who relocate. According to UN data approximately 245,000 South Africans now live in the UK, while Australia hosts an estimated 213,000.
Beyond these traditional choices, some less expected countries have emerged among the top destinations for South African expatriates. Mozambique, for example, is home to roughly 20,000 South African expats, while Ireland, Israel and even Iceland are seeing growing numbers of South African residents.
The other top relocation choices for expats include:
• The United States of America
• The United Arab Emirates
• New Zealand
• Canada
• The Netherlands
• Germany
• And closer to home, Mauritius
Is Your Destination as Appealing for Tax Purposes?
No move is straightforward, and many South African expatriates get caught up in the relocation process, paying little attention to tax affairs. This oversight can lead to costly consequences.
South African tax residency is not determined solely by where you live or earn income. Without taking formal steps to address your tax status, the South African Revenue Service (SARS) may still regard you as a tax resident — meaning your worldwide income remains taxable in South Africa.
This tax trap catches many South African expats off guard.
It is therefore just as important to ensure that, as beautiful as your relocation destination may be, it is also tax friendly from a South African perspective.
Your Choices with SARS — Before Penalties Catch Up
There should be no confusion among expat circles abroad: SARS taxes South African tax residents on their worldwide income, irrespective of where they live or whether they believe they are “off the radar.”
Becoming a non-resident for tax purposes to ensure SARS only taxes you on your South African sourced income, requires a formal process with the South African tax authority.
The good news for South Africans heading to the top 10 destinations is that we have DTAs in place with each of these countries which can provide tax relief.
South African tax law provides several mechanisms for individuals working abroad — whether temporarily or permanently — to manage their tax exposure. However, each mechanism comes with strict requirements.
Section 10(1)(o)(ii) Exemption
For South African tax residents earning income overseas, Section 10(1)(o)(ii) of the Income Tax Act relating to foreign employment income exemption may offer relief from double taxation.
To qualify, an individual must:
Importantly, this exemption applies only to employees. Independent contractors, consultants, and self-employed individuals are expressly excluded.
Formal Cessation of Tax Residency
For those intending to cut ties with South Africa permanently, a formal cessation of tax residency is required.
This involves proving to SARS that you are no longer ordinarily resident in the country. Once successfully ceased, you are taxed in South Africa only on South African sourced income, such as rental income from property — not on your worldwide earnings.
Double Taxation Agreements (DTAs)
South Africa’s network of DTAs offers valuable avenues for relief. DTAs can provide mechanisms for temporarily ceasing tax residency or for allocating taxing rights between countries.
However, this still requires a formal application to SARS. DTA relief does not apply automatically, even if the expatriate would otherwise qualify.
To determine whether an expatriate is eligible to become a non-resident under a DTA, they must consider:
South Africa has entered into DTAs with 82 countries. Only when a DTA is correctly applied will an expat be considered a non-resident for South African tax purposes, preventing SARS from taxing their worldwide income. This process does not apply automatically.
Status Overview of all DTAs and Protocols
The Cost of Getting It Wrong
Whether relying on the foreign employment income exemption, pursuing permanent cessation of tax residency, or using a DTA for temporary relief, the key is following the correct process.
Without taking formal action, South Africans living abroad risk remaining within the SARS tax net far longer than expected.
Protecting your wealth abroad begins at home. Making an informed decision about your South African tax residency — and formalising it correctly — is essential.
Professional advice can play a crucial role in ensuring compliance while avoiding unnecessary tax burdens, and correctly applying DTA provisions, particularly as more South Africans pack for new beginnings.
