As a South African, your SA tax obligations do not magically cease if you move abroad to live in another country.

Even after you leave, your tax obligations to SARS will continue because, by law, you remain a resident of South Africa for tax purposes. Only by pursuing financial emigration can you be freed of these obligations.

Tax residency

SA tax obligations changed in 2001, when South Africa moved from a source-based to a residency-based tax system. Before, you only paid tax on your local income. But since then, you are required to declare your worldwide income to meet your tax obligations to SARS. So, no matter where you live in the world, SARS continues to see you as a resident of South Africa for tax purposes.

Many South Africans work and live outside South Africa for extended periods – sometimes decades – but fully intend to eventually return to the country. In fact, the courts decreed that, if you would naturally return to South Africa after any length of time away, you are a resident and your SA tax obligations remain.

However, you can end your tax obligations to SARS if you pursue financial emigration. Financial emigration is a process whereby you inform SARS that you are ceasing tax residency and provide objective evidence of your intention to reside outside the country permanently. If it accepts this proof, you will be flagged as non-resident on its database of taxpayers and will be relieved of your tax obligations to SARS.

Until this happens, your SA tax obligations will persist. As an expat starting a new life abroad, these can prove to be an unwelcome burden on you.

Double tax agreements

South Africa has double tax agreements (DTAs) with many other jurisdictions to ensure you do not pay tax to both SARS and the local tax authority. In these areas, your payments to the local government will offset your SA tax obligations. To qualify for this allowance, you must obtain a DTA certificate from the local tax authority and submit it to SARS.

However, there are also many destinations that do not have tax treaties with SARS and, in these places, South Africans will indeed pay double tax.

Ongoing submissions

One of your tax obligations to SARS is to continue to submit tax returns annually. Even if some of your earnings fall below a certain threshold or are exempt on certain grounds – or you earn nothing at all – it is SARS that determines if those allowances are applicable. So you must still declare them.

This means making submissions to both governments each and every year.

Expat exemption

Expatriate South Africans are exempt from paying tax on the first R1.25 million of their worldwide income. This is provided those earnings result directly from employment and you are outside South Africa for more than 183 days of which 60 days must be continuous. Tax on amounts above this threshold are based on your marginal rate, up to 45%.

However, if you are self-employed or your income is from another source, such as investments or property rental, you do not qualify for this exemption. Your SA tax obligations then require you to pay tax on your full earnings.

Exchange rate fluctuations

If you qualify for the above exemption, bear in mind that the threshold is pegged in rands, not your local currency. If the rand dips against that currency, more of your income may be subject to South African tax than in previous years.

Capital gains

As a South African tax resident, one of your tax obligations to SARS is to pay capital gains tax (CGT) on the disposal of your assets, even those acquired after you leave SA. This includes your family home, which can diminish your available funds to purchase a new house to live in.

Unlike other countries that charge a flat rate, South Africa adds capital gains to your normal income and uses the marginal tax rate from the combined amount. This can be anything up to 45% of your profits.

Remnant income

A double tax agreement (DTA) does not entirely negate your SA tax obligations. If your new country of residence only taxes your locally sourced income, the remainder of your worldwide earnings must be declared in respect of your tax obligations to SARS.

Subject to SARS demands

As a tax resident of South Africa, your tax obligations to SARS include compliance with any and all of its directives. This is outside simply declaring income and paying tax.

You may be required to provide extra documentation and data SARS needs to perform its duties, or even submit to an audit.

You are also impacted by any future changes in tax laws or tax rates that might not be beneficial to you as an expat. And, if you do not comply, local authorities could be compelled to act against you to honour their tax treaty with SARS.

Financial emigration

If you intend to emigrate permanently, your tax obligations to SARS are not only a yearly administrative grind but also a significant financial risk, especially if your tax affairs are complex.

Although a DTA provides some relief, financial emigration is the only way to be completely free of your SA tax obligations. Through this process you will inform SARS that you are emigrating and provide it with the required objective evidence of your intention to leave permanently. After ceasing tax residency, you can apply for a SARS Non-Resident Tax Status Confirmation Letter for your records.

Financial emigration makes your SA tax obligations a thing of the past, so you can enjoy your life abroad without a second thought for SARS.