Budget Day 2026 brought what many South African taxpayers welcomed as a surprisingly stable and positive fiscal package. Rather than introducing aggressive revenue-raising measures, National Treasury adjusted several tax thresholds to counter inflation, offering meaningful relief to resident taxpayers.

These changes included adjustments to income tax brackets, rebates and duties, providing taxpayers with relief from the impact of inflation on their tax payments for the first time since 2023/24. Even the Single Discretionary Allowance, which determines how much money South African tax residents may transfer abroad per calendar year without the requirement to obtain a Sars Tax Compliance Status PIN letter, was increased to R2-million.

But while resident taxpayers breathe a sigh of relief, one group appears conspicuously absent from the list of beneficiaries: South African expatriates.

The Frozen Exemption: R1.25-million That Has Not Moved

One of the most important thresholds affecting South African expatriates — the foreign employment income tax exemption — remained unchanged once more.

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.

The problem? The fact that the R1.25-million threshold has not been adjusted for several years, despite persistent inflation. Based on inflation data from Statistics South Africa between 2020 and 2025, R1.25-million in 2020 equates to roughly R1.63-million today. 

Growing Tax Exposure for Expatriates 

The failure to adjust the threshold now means expatriates are more easily drifting into higher tax exposure on their South African personal income tax liability, as exceeding R1.25-million in earnings when working overseas, is becoming increasingly common.

Many may feel that while the fiscus has recognised the financial strain on domestic taxpayers and provided relief, their own circumstances have been ignored.

In a Budget that otherwise attempted to soften inflation’s impact on resident taxpayers, this raises uncomfortable questions. As this move may signal a Sars that is not interested in supporting expatriates by protecting their worldwide income from heavy taxes from a South African tax perspective, it begs the question whether the only real solution is to formally cease tax residency.

If the existing tax system becomes increasingly unaccommodating for globally mobile professionals, the risk is that more of them may decide to permanently exit South Africa’s tax residency net to protect their full foreign-sourced income from local taxation.

But even that path may no longer offer the peace of mind and certainty it once did.

When A Previously Issued Non-Resident Status Is Confirmed … and Withdrawn

Recently a worrying development has begun to surface for expatriate taxpayers.

Some individuals who previously formally ceased South African tax residency — and who are in possession of the Sars issued Notice of Non-Resident Tax Status — are receiving fresh correspondence from the tax authority about a review and withdrawal of their non-resident tax status.

This is causing huge uneasiness, especially as some taxpayers receive this communication more than a year after successfully updating their tax residency status to a non-resident taxpayer per Sars’ verification process, or after they have returned to South Africa.

Now not even the Notice of Non-Resident Tax Status seems to be foolproof as permanent relief for expatriates from paying taxes on their worldwide income for the time being abroad. For expatriates returning to South Africa, this makes the risk of back-taxes an unwelcoming possibility.

Sars’ Increasing Focus on Compliance is Here to Stay

This development aligns with Sars’ broader shift toward intensified compliance enforcement. 

Following the 2026 Budget, Sars reiterated that over the past six years, compliance revenue has become a defining feature of its revenue performance and a key contributor to fiscal stability. The compound annual growth rate of 18.8% in compliance revenue, reflects Sars’ move away from relying on economic cycles toward identifying, correcting, and preventing non‑compliance.

The message is clear: “The mandate of Sars is anchored on revenue collection, compliance enhancement and the facilitation of legitimate trade. By dutifully implementing its compliance programme, Sars is well positioned to collect all revenue due to the fiscus.”

This means the basis on which expatriates ceased tax residency and documentation supporting it, may increasingly fall under scrutiny.

The Risks of Getting it Wrong

Any application to cease tax residency, must be handled correctly.

The cessation must be properly formalised, either through:

• Application of a Double Tax Agreement (DTA) where applicable, or
• Financial emigration.

In order to avoid serious complications and questions about their tax residency status, expatriates must ensure that all tax returns during the non-resident period are filed, all outstanding tax liabilities are settled, and any capital gains tax triggered upon ceasing tax residency has been declared and paid.

When You Leave South Africa, Sars May Well Follow – Be Prepared

A common misconception among expatriates is that leaving South Africa automatically ends their tax obligations.

Leaving the country does not relinquish South African citizenship, does not deregister your tax number and most certainly does not remove your obligation to file a tax return.

Nor does it mean that Sars cannot revisit your affairs in the future.

In an environment where exemptions for expatriates are not keeping pace with inflation and previously granted residency changes may face renewed scrutiny, obtaining the correct advice from the outset has never been more important.

Because when it comes to expatriate taxation, Sars is showing little sign of letting up.

Written by Delano Abdoll, Legal Manager: Cross Border Taxation at Tax Consulting SA