What are the tax implications of emigrating from South Africa?
Emigration is when you physically move with all your belongings from South Africa to another country to start a new life. According to current South African tax law for expats, South Africans who are earning income abroad are assessed in terms of residency, based on the ordinarily resident test and the physical presence test. If you are still deemed a tax resident in South Africa, you are taxed on your worldwide income, subject to certain exclusions or exemptions.
In most instances, if you leave South Africa with the intention of living abroad permanently, you will cease to be a South African tax resident (due to the ordinarily resident test) and the result is that you, as a non-resident, will no longer pay tax on worldwide income, but only on income that has its source (rental, interest etc.) in South Africa. You will also pay capital gains tax (CGT) when you sell immovable property situated in South Africa or if you sell a business that was domiciled and registered in South Africa.
If you are working overseas and do not meet the physical presence requirements to be an ordinary resident in South Africa, you are exempt from tax on any foreign income. To qualify for this exemption, an employee (not self-employed) needs to have spent more than 183 full days (including a continuous period of more than 60 full days) outside of the country working, in any 12-month period. If this requirement is not met, then you are taxed on worldwide income.
However, in 2017 the National Treasury and the South African Revenue Service (SARS) announced that they would be introducing major changes in the tax exemption on South African expatriates. This new law will come into effect on 1 March 2020, and states that South African tax residents abroad will be required to pay tax to South Africa of up to 45% of their foreign employment income when it exceeds the R1.25 million threshold.