Storm clouds are brewing for South African residents who are working abroad. If that happens to be you, then make a mental note of the following date – March 2020 (the end of the tax year).

What’s significant about this date?

South African tax residents, who are living abroad, will be taxed on their overseas income if it exceeds R1 million! And remember that when we talk about “income”, we’re also including fringe benefits such as travel and housing allowances in case you thought that might be a little loophole to duck through.

Before we look at the proposed changes, let’s touch on how the tax system in South Africa is currently set up.

How does our residence-based taxation system work in South Africa?

In a nutshell it means you are only taxed on money you earn while living and working in South Africa – not on the bucks you earn while you’ve been working abroad.

Here is the definition:

A person is considered to be a tax resident when that person is ordinarily resident in South Africa or if they meet the physical presence test.


  • The first part of the definition is easy enough to understand. “Ordinarily resident” means the place where a person generally lives and works.
  • The physical presence test is applied when a person spends more than 183 days or 60 consecutive days, in any one year, overseas. In that instance the income generated abroad is not taxable by SARS.


Easy enough to understand. But it looks like it’s all changing come March 2020.

From the 1st March 2020 that physical tax exemption only applies to the first million Rand of income you earn while working overseas. If you earn over and above R1 million, while working abroad, you are going to be taxed up to 45% of the amount in excess of R1 million.

On the back of the Government’s strategy to tax South Africans working abroad, many of them are considering either a formal or financial emigration.

All that happens with financial emigration is that your status changes from resident to non-resident for exchange control and tax purposes.

There are advantages as well as disadvantages to financial emigration and it needs to be weighed up against whether a double taxation agreement exists between the host country you work in and South Africa.

If a double taxation agreement exists, then it’s quite possible you needn’t worry about financial emigration.

Seek advice from a tax consultant before applying for financial emigration. Especially if your earnings exceed the R1 million a year mark.


Until next time.

The MoneyShop Team