Immigration and Taxes - When Can You Divorce SARS?
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With more South Africans exploring work and life overseas and remote jobs becoming more common, accountants must understand how immigration and tax laws interact. The lines between immigration status and tax residency can be unclear and getting it wrong can have serious consequences for your clients. This article breaks down the key points from our recent CIBA webinar on Immigration and Taxation.
Immigration Status vs. Tax Residency
Let’s start with a common misconception: a person’s immigration status and tax residency are not the same thing.
As per section 1 of the Income Tax Act No. 58 of 1962 (ITA), a person can be:
A South African citizen but not a South African tax resident, or
A foreigner but still a tax resident of South Africa.
Immigration status is about the legal right to live and work in a country. Tax residency is about where a person is taxed on their income. South Africa taxes residents on their worldwide income. Non-residents are only taxed on income sourced in South Africa.
📌Example: A South African who moves to the Netherlands to live there permanently may stop being a tax resident, even if they keep their South African citizenship.
When Is Someone a Tax Resident?
There are two main tests for tax residency:
A. The Ordinary Residence Test
This is based on intent and personal circumstances. If South Africa is where you call "home," where your heart is, you are probably ordinarily resident here. Even if you live abroad for years and always plan to return, you may still be a South African tax resident.
📌Example: An individual who has worked abroad for 10 years but has always planned to return to SA and still owns a home here may still be considered a resident.
B. The Physical Presence Test
You become a tax resident if you are physically present in South Africa:
For at least 91 days in the current year,
For 91 days in each of the previous 5 years, and
For a total of 915 days over those 5 years.
You lose this status if you are out of the country for a continuous period of 330 days.
📌Example: An expat working in SA for over 3 years who exceeds these day counts will be a tax resident, even if they are not a citizen.
What About Double Tax Agreements (DTAs)?
Sometimes, a person might be a tax resident in more than one country. That’s where South Africa’s tax treaties (DTAs) come in (See the SARS website). DTAs help avoid double taxation.
They use “tie-breaker” rules to decide which country gets taxing rights:
Where is the permanent home?
Where are personal and economic ties stronger ("centre of vital interests")?
Where is the person habitually living?
What is the person's nationality?
📌Example: A South African living and working in Spain with a lease and family there will likely be deemed a Spanish tax resident under the treaty.
Ceasing to be a South African Tax Resident
Once someone breaks tax residency, they are deemed to have sold (and re-acquired) all their worldwide assets. This triggers Capital Gains Tax (CGT) under section 9H.
📣Important Note: There’s no clawback if they return later. SARS treats them as having a new base cost.
What you need to do:
Notify SARS of the change.
Be ready to calculate CGT based on market value at date of exit.
For clarification, also consult the SARS Guide on Foreign Employment Income (Issue 3) and the SARS Guide on the Taxation of Foreigners Working in South Africa (Issue 2).
How to Avoid Double Tax
There are three key ways:
Tax Treaties: Assign taxing rights between countries.
Section 10(1)(o)(ii): Employment income of up to R1.25 million is tax-exempt if the person:
Works outside SA for 183 full days in 12 months, and
At least 60 of those days are continuous.
Section 6quat: Provides a credit or deduction for taxes paid abroad. Remember that 6quat will apportion the foreign tax deduction allowed and a portion of it will not be allowed due to the Section 10(1)(o) exemption. Read our previous article on Tax Obligations of South African Tax Residents on Foreign Income.
📌Example: A South African working in Dubai may qualify for the R1.25m exemption if the conditions are met and claim foreign tax credits if taxed elsewhere.
Remote Work Complications
Many people work remotely for foreign employers but live in SA. SARS cares where the work is physically done, not where the employer is.
This principle is supported by the Lever Brothers case (a leading authority on the source of income) and the Income Tax Case 14218 (2018), though the latter's ruling was by the Tax Court and may be superseded.
📌Example: A South African working for a UK company while sitting in Joburg is earning SA-sourced income and must pay SA tax on it.
Trusts and Non-Resident Beneficiaries
New rules apply:
Since 1 March 2024, local trusts must pay tax on income or capital gains distributed to non-residents (section 25B and paragraph 80 of the Eighth Schedule to the ITA).
If a resident donor funded the trust, income may still be taxed in the donor's hands (section 7 of the ITA).
Practical Tips
Before a client immigrates or breaks tax residency, consider:
CGT on exit (especially if shares or trusts are involved).
Impact on business ownership or place of management.
Retirement fund withdrawal restrictions (per South African Reserve Bank (SARB) Exchange Control Manual and Regulation 28 of the Pension Funds Act No. 24 of 1956).
Need for tax residency certificates.
Exchange control and SA bank account implications.
Tip: Don’t rush. Unless clients urgently need to access retirement funds or renounce citizenship for a new one, it’s usually wise to wait until they have settled overseas.
Get up to date by watching the latest CIBA webinar on Immigration and Taxation
What will set you apart
You will walk away knowing:
How to spot the difference between immigration and change of tax residence (they’re not the same)
Where the real SARS traps lie—and how to avoid triggering exit taxes or audit flags
How to use tax Treaties when clients are tax-resident in more than one country
Practical steps to avoid double taxation and protect your clients’ cash
Real-world mistakes to avoid—the kind that cost clients (and accountants) big money
