Advice & Services for Wealth Management

An individual is a resident for tax purposes in South Africa either by way of ordinarily residence or by way of physical presence. The concept of “ordinarily residence” is not clearly defined and the determination of whether or not an individual is an ordinarily resident for tax purposes must be done on a case-by-case basis. A number of factors must be taken into account to make such a determination. Interpretation Note 3 (Issue 2): Resident: Definition in relation to a natural person – ordinarily resident sets out the list of factors that will be taken into account to determine whether an individual is ordinarily resident for tax purposes in South Africa.  

An individual can also become a tax resident by way of physical presence. For more details in this regard, refer to Interpretation Note 4 (Issue 5): Resident: Definition in relation to a natural person – physical presence test.  

An individual who is deemed to be exclusively a resident of another country for purposes of a tax treaty is excluded from the definition of “resident”. It follows that while an individual may qualify as a resident under the ordinarily resident or physical presence tests, that individual will not be regarded as a resident for South African tax purposes if that person is a resident of another country when applying a tax treaty.

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Immigration (physical relocation) – to another country from South Africa. Emigration (financial emigration) – from an exchange control perspective, is the financial exit from South Africa .

On completion of this process your financial status in South Africa changes from resident to non-resident.

This is a formal application that is lodged with a local bank in order to place a resident’s emigration on record. A declaration of the resident’s local assets forms the basis of this application. It is important to note that there is no requirement to liquidate any local assets in order to complete this process.

Yes, if an individual earns employment income in excess of R1.25 million and the double tax agreement between South Africa and the foreign country, if any, does not provide a sole taxing right to one country, both countries will have a right to tax the income. The portion of the income in excess of R1.25 million may end up being double taxed.      

Generally, under the provisions of the relevant double tax agreement, if an employee renders services in a foreign country exceeding 183 days, both countries enjoy the right to tax the income. The country of source enjoys the first right to tax the employment income and the country of residence, in our case South Africa, will provide double tax relief in the form of a foreign tax credit to the extent that tax was paid in both countries, subject to limitations.

Every resident above the age of 18 has two allowances that they can use to transfer funds from SA:

• Single Discretionary Allowance 

As a resident, you may transfer a total of R1 000 000 from SA every calendar year. Please note that all card transactions while you are abroad are included under this allowance.

• Foreign Investment Allowance

As a resident, you may also use this R10 000 000 allowance per calendar year. A tax clearance is required from SARS. This tax clearance is associated with the Foreign Investment Allowance and differs from a normal ‘good standing’ tax clearance.
You may also transfer funds abroad in excess of these allowances. Please contact us for more information.
The minimum requirement for transferring funds is that you must be in possession of a green bar-coded ID document or the latest ID card.

Foreign transfers do not attract any tax liabilities. Normal tax rules apply to the transaction. An example would be donations. Tax is incurred when funds are donated to a third party living abroad.

What is it?

Most countries impose tax on the worldwide income earned by a resident of that country and on income earned by non-residents on locally earned income. Therefore someone can be double taxed because they can be taxed in the country of residence as well as in the country of source where the income was earned.   Certain countries have agreements to avoid double taxation. Normally these agreements provide that income of a certain nature will be taxed only in one of the two countries or may be taxed in both countries and the country of residence will allow a credit for the tax which has been imposed by source country.  South Africa has agreements with a number of countries to prevent double taxation of income.

Who is it for?

A non-resident, who is not a tax resident of South Africa and receives income from a source in South Africa needs to apply for a directive for the relief from South African tax on pension and annuity income (excluding lump sums) or who wants a refund of tax that was withheld in terms of the Income Tax Act No. 58 of 1962 (the Act).   The request should be in terms of the Double Taxation Agreement (DTA) that is in place between SA and the non-resident’s country of residence.

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