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Emigration essentials – top tips from the experts for filing your final South African tax return

Emigration essentials – top tips from the experts for filing your final South African tax return

May 27, 2024


Emigration is an exciting adventure, but it is essential to consider the tax implications of your international moves beforehand. This is because South Africa taxes residents on their worldwide income, and failing to address your tax residency status can lead to hefty penalties. Here’s what you need to know about preparing to file your last tax return with the South African Revenue Service (SARS) to stay on the right side of the tax authority.

Understanding your tax residency status – the starting point

Determining your tax residency status is the first step to sorting out your emigration tax affairs. South Africa uses a residency-based system, meaning you might still be liable for South African taxes even after leaving. To assess residency, SARS considers factors like your spouse’s location, time spent in South Africa, and asset holdings.

Read more: Taxing matters: a guide to understanding South African tax residency for expats.

Understanding how to streamline your South Africa tax emigration

If you’ve left South Africa with no intention to return, you must break off your relationship with SARS. Here’s how to efficiently navigate the tax emigration process:

  1. Initiate tax emigration after physical departure: Head to SARS eFiling and complete the “Registration, Amendments, and Verification form” (RAV01). You have a duty to inform SARS that your details have changed within 21 days of the change occurring.
  2. Ensure accurate dates: On the RAV01 form, you’ll need to verify that your “Income Tax Liability Details” section reflects your departure date, as this is the date that will be noted as your cessation of tax residency date.
  3. Update before filing: To avoid delays, update your details using the RAV01 form before submitting your annual tax return.
  4. Respond to SARS prompts: Await a response from SARS regarding your RAV01 form submission. Submit any requested supporting documents promptly.
  5. Finalise and confirm: Once you settle your exit tax liability, you’ll receive a Non-Resident Confirmation Letter from SARS. This signifies the completion of your tax emigration process.

Understanding your tax filing requirements

As long as you remain a tax resident (i.e.: until you have received your Non-Resident Confirmation Letter from SARS), you must file tax returns in South Africa. However, you might qualify for exemptions depending on your income and circumstances. Spending over 183 days outside the country (including at least 60 consecutive days) allows you to claim an exemption on a portion of your foreign income. Double Taxation Agreements (DTAs) with other countries can also offer tax relief.

Read more: Do I still need to submit my South African tax returns if I’ve emigrated?

Understanding how to minimise your Capital Gains Tax (CGT) liability when becoming a non-resident

Emigration triggers a “deemed disposal” event for tax purposes. SARS treats you as if you’ve sold all your worldwide assets to your now-foreign self on the day you emigrate, resulting in a CGT liability. Here’s a strategy to potentially reduce your exit tax before you file that final tax return:

  • Leave early in the tax year: Since capital gains are added to your annual income, a lower overall income (due to leaving early) can keep you in a lower tax bracket and reduce your tax burden. Remember, this tax is due immediately upon leaving, not at the end of the tax year.

Read more:

Understanding Capital Gains Tax on your South African property

South African property is excluded from the exit tax calculation upon becoming a non-resident, but you’ll still face CGT when selling it. Here are some ways to manage this:

  • Primary residence exemption: Sell your primary residence before emigrating to benefit from the R2 million CGT exemption.
  • Tax bracket considerations: If your property exceeds R2 million and is sold in the same year as your exit, ensure the combined CGT doesn’t push you into a higher tax bracket.
  • Non-primary residence: Seek tax advice to calculate your potential CGT liability if the property sold wasn’t your primary residence.

Top three emigration tax tips from the experts:

  1. Use the selling attempt allowance: You might be eligible for special allowances if you can demonstrate that you tried to sell your primary residence before leaving.
  2. Leverage the extended “primary residence” status: Listing your primary residence for sale before leaving can extend its “primary residence” status for two years while on the market, allowing you to utilise the R2 million exemption.
  3. Avoid renting your primary residence before leaving, as it disqualifies it from the exemption. Renting is allowed after leaving as long as the property remains on the market.

Address your tax emigration as soon as possible.

Don’t delay notifying SARS about your emigration. This can lead to surprise audits, higher exit taxes based on current asset values, and potential penalties, all of which you’d prefer to avoid when filing your last tax return in South Africa. It is also important to notify SARS of your emigration and gain non-resident tax status as soon as possible, as you will need to maintain this status for three consecutive years before you will become eligible to cash in your retirement annuities.

Once you have filed your last tax return in South Africa (and assuming you have no income-bearing assets left behind), you can then deregister your SARS income tax number.

FinGlobal: cross-border financial specialists for South African expats

Handling your tax emigration solo? You shouldn’t have to. That’s what FinGlobal does best. We’re ready to step in and handle all the paperwork, legalities and tax for you, every step of the way. You can track our progress online as we jump through all of SARS’ hoops on your behalf. Simple. Straightforward. Stress-free. That’s what we can do for you.

To test our services, please leave your contact details in the form below, and we’ll contact you to discuss your financial objectives.

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