One important threshold affecting South African expatriates, the foreign employment income tax exemption, has not been amended in South Africa’s 2026 budget. Under section 10(1)(o)(ii) of the Income Tax Act, South African tax residents earning abroad may exempt up to R1.25 million of foreign employment income from South African tax per year of assessment, provided they meet strict requirements. The exemption applies only to employees, while independent contractors, consultants or self-employed persons do not qualify.
Any foreign employment income earned over and above R1.25 million is subject to personal income tax in South Africa, applying the normal tax rates for the particular year of assessment.
What is the impact of financial emigration on tax residence?
Acquiring approval from the South African Reserve Bank to emigrate from a financial perspective is not connected to an individual’s tax residence. Financial emigration is merely one factor that may be taken into account to determine whether or not an individual broke his or her tax residence. An individual’s tax residence is not automatically broken when he or she financially emigrates. The deciding factor remains whether or not an individual breaks his or her ordinary residence.
Residence-based tax system
From 1 March 2001, South Africa moved from a source-based to a residence-based tax system for individuals. This meant that tax residents would be subject to tax on worldwide income (excluding certain exemptions or exclusions) and non-residents would be subject to tax on income from a source within South Africa. For more information on the tax treatment of nonresidents in South Africa, please refer to the Non-Residents webpage on the SARS website.
What type of income is covered?
The following amounts fall with the scope of the exemption:
salary;
taxable benefits;
leave pay;
wage;
overtime pay;
bonus;
gratuity;
commission;
fee;
emolument;
allowance (including travel allowances, advances and reimbursements;
amounts derived from broad-based employee share plans; or
amounts received in respect of a share vesting.
Can double taxation occur?
Yes, if an individual earns employment income in excess of R1.25 million and the double tax agreement between South Africa and the foreign country, if any, does not provide a sole taxing right to one country, both countries will have a right to tax the income. The portion of the income in excess of R1.25 million may end up being double taxed.
Generally, under the provisions of the relevant double tax agreement, if an employee renders services in a foreign country exceeding 183 days, both countries enjoy the right to tax the income. The country of source enjoys the first right to tax the employment income, and the country of residence, in our case South Africa, will provide double tax relief in the form of a foreign tax credit to the extent that tax was paid in both countries, subject to limitations.
Is there relief from double tax?
Section 6quat is the mechanism under South Africa’s domestic law to claim relief from double tax where the amount received for services rendered outside South Africa is subject to tax in South Africa and in the foreign country. This credit may be claimed on assessment through an individual’s income tax return, provided certain requirements are met.
An employer may, at his or her discretion, under paragraph 10 of the Fourth Schedule, apply for a directive from SARS to take into account the potential section 6quat credit on a monthly basis to determine the employees’ tax liability. For more information on Directives under paragraph 10 of the Fourth Schedule, please access the SARS page here: https://www.sars.gov.za/individuals/i-need-help-with-my-tax/your-tax-questions-answered/directives-under-paragraph-10-of-the-fourth-schedule/
Who is a tax resident?
A tax resident may also, due to a matter of choice or circumstances, cease to be a tax resident of South Africa. Such a change in tax residency status must be declared to SARS, as there may be consequential tax implications.
An individual is a resident for tax purposes in South Africa either by way of ordinary residence or by way of physical presence. The concept of “ordinary residence” is not clearly defined, and the determination of whether or not an individual is an ordinary resident for tax purposes must be done on a case-by-case basis. A number of factors must be taken into account to make such a determination. SARS Interpretation Note 3 (Issue 2): Resident: Definition in relation to a natural person – ‘ordinarily resident’ sets out the list of factors that will be taken into account to determine whether an individual is ordinarily resident for tax purposes in South Africa. An individual can also become a tax resident by way of physical presence. For more details in this regard, refer to SARS Interpretation Note 4 (Issue 5): Resident: Definition in relation to a natural person – physical presence test.
An individual who is deemed to be exclusively a resident of another country for purposes of a double tax agreement is excluded from the definition of “resident”. It follows that while an individual may qualify as a resident under the ordinarily resident or physical presence tests, that individual will not be regarded as a resident for South African tax purposes if that person is a resident of another country when applying a double tax agreement.
Ceasing to be an SA tax resident
How do I cease to be a tax resident in South Africa?
The determination of whether an individual ceases to be a tax resident in South Africa is based on the manner in which such individual has been a tax resident in South Africa. If the taxpayer has been an ordinary tax resident, it is a factual enquiry on whether or not that person’s subjective intention to cease to be ordinarily resident in South Africa and no longer make South Africa his or her real home is supported by various objective factors. If a person has ceased to be an ordinary tax resident, it will be from the day such person ceased his or her residence.
Factors that will be taken into account to determine whether a taxpayer has ceased to be a tax resident of South Africa:
The type of visa on which you have gone to the foreign country.
Proof of permanent residence in the foreign country (if applicable).
A certificate of tax residence from the foreign revenue authority or a letter from the authority that indicates that you are regarded as a tax resident in that country (if available).
Details of any property that you may still have available in South Africa. Indicate the purpose for which such property is being used.
Details of any business interest (e.g., investment and employment) that you may still have in South Africa.
Details of your family. Indicate whether any family members are in South Africa and the reasons therefore.
Details of your social interests (e.g., gym contract, recreational clubs and societies) and location of your personal belongings.
Details of any return visits to South Africa, their frequency and the reason for undertaking such visits.
An individual, who is resident by virtue of the physical presence test, ceases to be a resident when that person is physically outside the Republic for a continuous period of at least 330 full days. The individual will be deemed to have ceased to be a resident from the day such a person left South Africa.
An individual who has become a tax resident of another country through the application of a double tax agreement will also cease to be a resident for tax purposes in South Africa.
What are the consequences if I have ceased to be a tax resident?
A deemed disposal for capital gains tax purposes takes place at the time when an individual breaks his or her tax residence. The individual will be deemed to have disposed of his or her worldwide assets, excluding immovable property situated in South Africa. Once a person has ceased to be a tax resident in South Africa, such a person is no longer taxed in South Africa on his or her worldwide income but only on South African-sourced income.
How do I declare to SARS that I have ceased to be a tax resident in South Africa?
If a taxpayer ceased to be a tax resident of South Africa, the taxpayer should inform SARS through the Registration, Amendments And Verification Form (RAV01) on eFiling by capturing the date on which the taxpayer ceased to be a tax resident under the Income Tax Liability Details section. This date will be regarded as the day the taxpayer becomes a non-resident. The form can be obtained on the eFiling Client Information System | South African Revenue Service (sars.gov.za) or at a SARS branch by making an appointment.
Note: A case will be created whereby the taxpayer will receive a letter from SARS to submit supporting documents. If you are not registered yet on eFiling, you may continue to use the contactus@sars.gov.za email address.
What is the purpose of such a declaration when I cease to be a tax resident in South Africa?
The purpose of the declaration is to inform SARS of the change in tax residency that will impact the basis on which you will be subject to tax in South Africa and how your returns will be assessed going forward. The year in which you have ceased to be a tax resident may also result in a possible deemed capital gains tax disposal depending on the type of assets you held and where they are located at the time.
When must a declaration be made?
When an individual ceases to be a tax resident, SARS must be informed.
Who must make such a declaration?
The individual taxpayer or their authorised representative must inform SARS by making such a declaration.
What documentation should be provided?
The Declaration form must be completed and be submitted with the relevant supporting documentation through eFiling or SOQS upon the taxpayer informing SARS that s/he ceased to be a tax resident on the RAV01 form. If you are not registered yet on eFiling, you may continue to use the contactus@sars.gov.za email address.
Standard requirements (to be submitted with all declarations)
The signed declaration indicating the basis on which you qualify.
A letter of motivation setting out the facts and circumstances in detail to support the disclosure that you have ceased to be a tax resident.
A copy of your passport/travel diary, including all pages of your passport reflecting relevant customs entry and exit date stamps.
Specific requirements
In addition to the aforementioned information, also supply the following as applicable, depending on the basis you have ceased to be a tax resident in South Africa:
Qualifying basis 1: Cease to be ordinarily resident
The type of visa on which you have gone to the foreign country.
Where you have already taken up permanent residence in the foreign country, submit proof thereof.
A certificate of tax residence from the foreign revenue authority or a letter from the authority that indicates that you are regarded as a tax resident in that country (if available).
Details of any property that you may still have available in South Africa (indicate the purpose that such property is being used for).
Details of any business interest (e.g., investment and employment) that you may still have in South Africa.
Details of your family. Indicate whether any family members are in South Africa and the reason for it.
Details of your social interests (e.g., gym contract, recreational clubs and societies) and location of your personal belongings.
Details of any return visits to South Africa, the frequency thereof and the reason for undertaking such visits.
Qualifying basis 2: Cease by way of the physical presence test. Only the standard requirements must be supplied.
Qualifying basis 3: Cease due to application of a Double Tax Agreement (DTA)
A certificate of tax residence from the foreign revenue authority or a letter from the authority that indicates your status as a tax resident in that country.
When will a declaration be declined when I cease to be a tax resident in South Africa?
A declaration will be declined if one of the following conditions apply:
If the taxpayer does not meet the criteria for ceasing to be a tax resident.
If the taxpayer cannot provide us with the relevant materials or the correct relevant materials as requested.
One simply cannot escape the long arm of the taxman. Make sure your tax affairs are in order no matter where you work or reside. Death and taxes; the only two mandatory things in life.