What tax emigration actually means now (post-2021)

Tax emigration is one of those phrases that has caused enormous confusion among South Africans living abroad - partly because it used to mean something different, and partly because the rules changed significantly in March 2021.

Here is a clear explanation of what it means now, who needs to do it, and what actually happens when you go through the process.

What changed in March 2021

Before March 2021, South Africans could complete a process called financial emigration through the South African Reserve Bank. This involved formally changing your status with SARB and had specific implications for exchange control purposes.

That process no longer exists. SARB discontinued it in March 2021.

What replaced it - and what matters now - is cessation of South African tax residency. This is a SARS process, not a SARB one. It is sometimes called tax emigration, though the formal terminology is cessation of SA tax residency. The two phrases mean the same thing in the current context.

What tax emigration actually involves today

Ceasing your South African tax residency means formally notifying SARS that you are no longer a South African tax resident - and having SARS accept that position.

SARS determines tax residency based on two tests: the ordinarily resident test (essentially, where is your permanent home?) and the physical presence test (how many days have you spent in South Africa over a rolling period?). If you have been living in the UK for several years and South Africa is no longer your home, you will likely qualify to cease SA tax residency.

The process involves filing a specific return with SARS, declaring your cessation date, and paying any exit tax that may apply - SARS treats certain assets as deemed disposed of on the date you cease to be a resident, which can trigger a capital gains tax calculation. A SARS-registered tax practitioner, like the one who works with our team, handles this on your behalf.

Why does it matter if you are already living abroad?

Several reasons.

First, if you are still technically a South African tax resident, you may still have SARS filing obligations - including declaring worldwide income to SARS. Many South Africans living abroad are unaware of this and accumulate years of unfiled returns without realising it.

Second, if you want to access your South African retirement annuity, you need to have ceased SA tax residency - and SARS must confirm this status - before you can encash the fund. There is also a minimum three-year waiting period from the date of cessation before the RA can be accessed.

Third, completing the process gives you clean closure on your South African tax affairs, which makes future transfers simpler and more straightforward.

What about the old SARB financial emigration - does it still count?

If you completed SARB financial emigration before March 2021, it does not automatically mean you have ceased your SA tax residency. The two processes were separate. Completing one did not fulfil the other. If you went through the old SARB process but never formally notified SARS of your tax residency status, you may still have obligations.

This is one of the most common situations we encounter - people who believe they have fully emigrated from a financial perspective, but whose SARS status has never been updated. We can help you understand where you stand.

How WBForex helps

WBForex works with an in-house SARS-registered tax practitioner who manages the cessation of SA tax residency process on behalf of our clients. We handle the SARS side end-to-end - the filing, the documentation, the communication with SARS, and the confirmation of your new status.

If you are not sure whether you have completed this process, or if you did the old SARB financial emigration and are unsure where that leaves you, get in touch. We will give you a clear picture of where you stand before we recommend any next steps.

Talk to us about tax emigration