How can I stop being a South African tax resident?

Don’t assume that if you were a taxpayer in South Africa and you leave, that you will automatically become non-resident for tax purposes with no obligation to file tax returns and pay tax on the income you earn.

You need to follow a formal process to become non-resident and this will also give you the ability to move your money out of the country.

If you become a non-resident, you may also be liable for capital gains tax on your assets other than property in South Africa.

There are two ways to stop being a tax resident:

1.  Financial or tax emigration

If you are leaving South Africa permanently you should:

• Complete the Registration, Amendments And Verification (RAV01) form on the efiling website of the South African Revenue Service (SARS) to state that you are ceasing to be a resident. You can do this before you have become a permanent resident or citizen of another country, but you will need to provide documents showing your intent to leave South Africa.
  
  If you have already left, you will also need to prove your residency in another country is permanent.

SARS often requests a certificate of tax residency from the foreign country in which you are living. You may be unable to obtain this certificate if the country in which you live does not provide it or you are unemployed in another country.

• Once you have proved your non-residence to SARS, it should issue you with a Notice of Non-Resident Tax Status letter.
  
  
• If your tax affairs are in order, you will also receive what is known as an Approval for International Transfer (AIT) Tax Compliance Status (TCS) and an AIT pin from SARS that you will be able to use when you send money out of the country through an authorised exchange control dealer. The exchange control limits apply as long as you are resident. No limits apply when you are non-resident but if you exceed the annual R10 million foreign capital allowance and the R1 million discretionary allowance, you will need approval from the South African Reserve Bank.

• You don’t need to close your South African bank account – but you do need to change your bank account status to “non-resident”.

• If you have savings in a retirement annuity or any savings in your retirement pot under the two-pot retirement system to be implemented on September 1, you may have to wait three years after you became a non-resident to withdraw the money. You will need the Notice of Non-Resident Tax Status to prove to the fund your non-residency. Read more: What happens to your retirement savings when you emigrate?
  
  If you resign from employment and have savings in an employer-sponsored fund, you will be able to withdraw any money in the vested pot that you saved before the implementation of the two-pot retirement system on September 1 2024 and take it with you immediately. You will also be able to take what is in the savings pot. However, you will be liable for tax on the savings you withdraw.

2.  Make use of the double tax agreement

If you leave South Africa to live in a country that has a double taxation agreement with South Africa and you intend to return one day, you can cease to be a tax resident of South Africa by proving to SARS that you are a resident for tax purposes in another country.

This is an option you can use if the income you earn in a foreign country exceeds the R1.25 million foreign employment exemption.

You will need to get a tax residency certificate from the foreign country in which you are living each year and then apply to SARS for non-resident status.

SARS will consider a number of factors including what access you have to property, where you habitually live and the country in which you are a citizen.

If the matter is not clear cut, the countries may agree which one will have the right to tax you.

You will have to change the status of your bank account to non-resident and if you are deemed to be a non-resident as a result of a double taxation agreement, you could become liable for CGT (see below).

“Exit” taxes

If you become a non-resident for tax purposes, it does not mean you have to sell your property and investments in South Africa.

But when you cease to be a resident of South Africa, you should be prepared to pay capital gains tax (CGT) on all your assets – excluding physical property you continue to own - but including any foreign property, shares or cryptocurrencies you own.

This is because when you cease to be a resident, you are regarded or “deemed” to have disposed of your assets in this country and this makes you liable for CGT.  Read more: What is capital gains tax?

Cash, personal use assets and money in your retirement fund will not attract CGT, but you may be liable for income tax on retirement fund savings if you withdraw from your fund.

If you have already left South Africa to work overseas without changing your tax residence status but then decide to stay permanently overseas, you can apply to back-date the change to the date on which you left. You will then pay tax on your South African assets excluding property that you owned when you left the country, but you will avoid paying CGT on assets you have acquired since leaving South Africa.

If you have property or investments in South Africa or expect to inherit from family in this country, you should not deregister as a taxpayer – you can continue to submit tax returns as a non-resident on income earned here and to apply for credits for tax paid in another country.