Deciding to leave South Africa permanently is not as easy as simply shutting the door and flying off into the sunset, even though many families are choosing to pursue new dreams and opportunities elsewhere.

Emigration is a complicated, lengthy and costly process that involves more than you may be aware of. In this blog, we’ll focus on tax implications.

What is emigration?

There’s a difference between working abroad with a temporary work visa or as a permanent resident and emigrating. Emigrating means moving to a new country permanently to settle and perhaps become a citizen. If you’re packing up and don’t plan to return, you need to declare it to the South African Revenue Services (SARS), so that you can be removed from the list of South African taxpayers. SARS calls this status ‘ceasing to be a resident for tax purposes’, but it is more commonly known as ‘financial emigration’.

Until late 2021 this process was plagued by uncertainty over when exactly you’re no longer a tax resident. Following frustrated complaints, SARS announced it would issue a certificate formally confirming your change in status from now on. This means you can now apply for a ‘Notice of non-resident tax status’ that confirms you are officially a non-resident in South Africa.

It is crucial to change your tax status, because if you’re a registered South African taxpayer, SARS claims tax on all your income, no matter where or how you earned it. So, if you leave the country permanently and don’t tell SARS, there’s a chance that you could be charged tax on your earnings abroad.

This is the situation for any South Africans living and working abroad who haven’t cut ties with South Africa. If you’re earning an income while abroad, SARS lays claim to tax on earnings over R1.25 million a year.

How to stop being a resident for tax purposes

The only way to leave the country properly and live and work permanently somewhere else, is to deregister as a South African taxpayer and register as one in your new country of residence. SARS then has no claim over you, unless you earn income in South Africa as well, in which case you’ll be taxed as a non-resident.

You may feel overwhelmed by everything that’s required, so don’t be afraid to get help

Before you get to that point, though, you need to inform the tax authorities that you intend to leave the country for good. SARS wants to make sure your tax affairs are in order and whether you need to be charged exit tax before you jet off.

Your first step is to follow the TCR01 process on the SARS eFiling portal to have an Emigration Tax Compliance Status (TCS) PIN issued to you. This PIN is valid for a year and confirms your status as non-tax resident. If it takes you longer than a year to complete your emigration process, the PIN will expire and you will need to apply for a new one.

Basically, the PIN means that SARS is comfortable that you’re not skipping the country leaving unpaid taxes and gives your bank authorisation to transfer your money into your nominated offshore bank accounts.

Factors SARS looks at when deciding whether to deregister you

• Type of visa you have to enter the foreign country, or
• Proof of permanent residence in that country, or
• A certificate or letter from the revenue authority of that country, confirming your tax residence there.
• Details and the purpose of property you still have in South Africa.
• Details of business interests you still have in South Africa.
• Details of all your family members (whether they live in South Africa or abroad).
• Details of your social interests (for example, gym contracts, recreational clubs and societies) and location of your personal belongings.
• Details of any planned future return visits to South Africa, how often and why.

These are just some of the hoops you’ll have to jump through. Go to Tax and Emigration on the SARS web page for more detailed information.

You may feel overwhelmed by everything that’s required, so don’t be afraid to get help. It’s a complex process that requires expert knowledge if you want it done as fast as possible with the least hassle. If you’re a Nedbank client, you can rely on our team of non-resident banking (NRB) experts to guide you through the process.

Documents required

You need the following documents to apply for a SARS TCS PIN:

• Certified copies of your identity document.
• A utility bill (not older than 3 months) showing your residential address abroad.
• Full names and identity numbers, or dates of birth, of everyone in your family who must be reclassified.
• Original waiver and indemnity.
• Supporting documents for all assets and liabilities declared to SARS.
• Confirmation of your non-resident status – either a foreign passport or certificate of naturalisation or citizenship.

Know your tax obligations

As you can see, uprooting your life to go live in another part of the planet is anything but a quick and easy move. And with this complexity comes a whole lot of costs.

You can avoid nasty surprises and gain some peace of mind if you speak to our team of non-resident banking experts

Getting your family and household belongings to your new home is a major logistical and financial challenge. And when your belongings finally arrive, you may face a customs inspection and possibly even import duties – not the type of surprise you need after just paying exit tax.

This levy is charged when you officially exit the country and the local tax system. The justification is that SARS considers your leaving the country as selling your worldwide assets to your foreign self. This triggers capital gains tax, because SARS argues that it would have claimed tax on those assets if you’d sold them while you were still a tax resident.

And you’ll also probably need to submit at least one more tax return – even after you’ve emigrated. This is because of the delay between the tax year ending and the deadline for tax submissions, which can be anything from 6 to 18 months.

Remember, National Treasury changed the rules in 2021 so that you can no longer take your retirement savings when emigrating. You must now wait 3 years before you can get access to your retirement savings as a lump sum. All in all, financial emigration is a complicated minefield for the average emigrant.

You can avoid nasty surprises and gain some peace of mind if you speak to our team of non-resident banking experts. They will help you navigate the emigration process – as well as those inevitable loose ends that will crop up. They often mean that you would still need a banking relationship in South Africa for at least a few years after you have left.

Email us at NREB@Nedbank.co.za to get the advice and support you need for a smooth emigration journey.