As South Africans seek new lives and opportunities abroad, many remain unaware that their tax obligations at home will continue to follow them until they formally cut tax ties with the South African Revenue Service (Sars). 

Ceasing to be a South African tax resident with Sars is a critical step for expatriates who do not intend to return home. The permanent tax residency cessation process, known as financial or tax emigration, ensures that individuals are no longer classified as South African tax residents. Without completing it, expats remain liable for tax on their global income and assets, even if they live halfway across the world and have done so for many years.

According to Sars data, nearly 38 000 South Africans living abroad have completed the process of changing their tax residency status to that of non-resident taxpayer. This, while an estimated 915 000 South Africans currently reside outside the country.

Why The Big Gap?

Tax professionals suggest the disparity is due to confusion about the correct process for formally severing tax ties with South Africa, as well as the misconception that physically leaving the country automatically ends your tax obligations.

This is where tax emigration becomes crucial. South Africa has a residency-based tax system, meaning:

• Non-residents are taxed only on South African-sourced income.
• Tax residents are taxed on their worldwide income.

It is clear that being classified as a South African tax resident may result in unintended tax liabilities, including on foreign income and assets.

It is essential that Sars’ system reflects your correct tax residency status, and it is up to you as the taxpayer to ensure this is the case. 

Do Not Assume, Check Your Tax Residency Status

If you emigrated before March 2021 and jumped through every hoop to cease South African tax residency, securing your Emigration Tax Clearance Certificate (ETCC), a stamp of approval from the South African Reserve Bank (SARB), and ticking all the necessary boxes – you may be surprised to learn that you are still classified as a tax resident on the Sars eFiling system.

That is because under updated Sars regulations, none of these previous steps apply. To change your tax residency status to that of non-resident, you must have formally declared the date of cessation through the current process. The only official proof of non-tax resident status after March 2021 is the Non-Resident Tax Status Confirmation Letter issued by Sars.

Sars is effectively resetting the system, and it is essential to act. Those who fail to align with the new process, risk being reverted to tax residents, with possible non-compliance and tax penalties to follow.

Benefits for Expats Who Have Ceased Tax Residency Under the New Rules

South African expatriates who have completed the process and have the Sars Non-Resident Tax Status Confirmation Letter in hand, are eligible to benefit from the “3-year lock-up” rule governing the early withdrawal of retirement annuities and pension interests still held in South Africa. This regulation stipulates that individuals must be classified as non-resident taxpayers for tax purposes for at least three consecutive years before they can make an early lump sum withdrawal of their full retirement and pension.

In addition to the above, this non-residency status must be substantiated by demonstrating minimal physical presence in South Africa. Once these conditions are satisfied, the financial institution administering your retirement policy may process the withdrawal request.

The Good News

When applying to cease tax residency, Sars allows one to backdate cessation to the time the taxpayer’s intent to remain abroad became clear, as long as it is backed by credible evidence.

For expatriates who been living abroad and meet the requirements, this opens the door for:

• Early access to retirement and pension savings held in South Africa;
• Protecting these funds from unnecessary taxation by applying for tax relief under an applicable Double Taxation Agreement (DTA) between South Africa and the new country of residence.

Conclusion

Taking timely and appropriate action ensures compliance and secures access to financial entitlements while protecting your future abroad. If you need clarity on your tax residency status, formalising your non-residency or evaluating your eligibility under the 3-year lock-up rule, professional guidance is recommended.

By formally ceasing your tax residency, you align your tax status with your lifestyle and location, avoid double taxation, and gain peace of mind in managing your financial future abroad.

Written by Shuanita de Wet, Process Specialist: Expatriate Tax at Tax Consulting South Africa; and Bronwyn Jacob, Process Specialist: Expatriate Tax at Tax Consulting South Africa