Expat Tax Residency in South Africa

South Africa operates a residence-based tax system: individuals who qualify as tax residents under the Income Tax Act 58 of 1962 are assessed on their worldwide income, regardless of where that income is earned. Non-residents pay South African tax only on income sourced within the country. The South African Revenue Service (SARS) applies two alternative tests to determine residency, and satisfying either one is sufficient to bring an individual into the worldwide-income net.

What is the ordinarily resident test?

The ordinarily resident test is a common-law, facts-and-circumstances inquiry. According to SARS, an individual is ordinarily resident in South Africa if the country is the place to which that person would naturally and as a matter of course return after their travels -- in other words, their usual or principal residence, their real home. The test was shaped by South African case law including Cohen v CIR (1946) and is confirmed in SARS Interpretation Note 3. Physical absence alone does not break ordinary residence; the individual must genuinely sever family, economic, and social ties. Once established, ordinary residence tends to be sticky and difficult to exit on the facts [SC1].

What is the physical presence test?

The physical presence test is a statutory, day-count alternative for individuals who are not ordinarily resident. All three of the following thresholds must be exceeded in the same assessment period, as set out in Section 1 of the Income Tax Act and explained in SARS Interpretation Note 4 [SC1]:

Once an individual satisfies the physical presence test, residency continues until that person has been outside South Africa for a continuous period of at least 330 full days. That 330-day continuous absence is the statutory exit mechanism for individuals resident under this test.

How are South African tax residents taxed on worldwide income?

Tax residents are assessed on worldwide income at the progressive personal income tax rates published by SARS. For the 2026 tax year (1 March 2025 to 28 February 2026), rates run from 18 percent on the first ZAR 237,100 of taxable income up to 45 percent on income above ZAR 1,817,000. The 45 percent top marginal rate has applied since the 2017 tax year. A primary rebate of ZAR 17,235 reduces the tax payable [SC2].

Residents who pay foreign taxes on foreign-source income may claim a rebate under section 6quat of the Income Tax Act to reduce double taxation, subject to limitations. Double taxation agreements that South Africa has concluded with more than 80 countries can also allocate taxing rights, which may reduce or eliminate the South African liability on particular income streams.

What is the section 10(1)(o)(ii) foreign employment income exemption?

Section 10(1)(o)(ii) of the Income Tax Act provides a partial exemption for South African tax residents who render services for an employer outside South Africa. The exemption applies where the individual is outside South Africa for more than 183 full days during any 12-month period, and at least 60 of those days are consecutive [SC3].

With effect from 1 March 2020, the exemption is capped: only the first ZAR 1.25 million of qualifying foreign employment income is exempt from South African normal tax. Foreign employment income above that threshold is fully taxable at the resident marginal rates, with a section 6quat rebate available for foreign tax paid on the excess. Before March 2020, the exemption was unlimited -- a significant structural change that brought high-earning expats into the South African tax net for the first time [SC3].

The ZAR 1.25 million threshold has not been adjusted for inflation since its introduction. The National Budget presented on 12 March 2025 left the threshold unchanged for the 2026 tax year [SC4].

Independent contractors and public-sector employees who hold public office are excluded from the section 10(1)(o)(ii) exemption entirely.

What replaced financial emigration, and what is the exit tax?

Before 1 March 2021, expatriates who wished to formally exit the South African tax system were required to complete a process known as financial emigration through the South African Reserve Bank (SARB). That process has been replaced by the cease-to-be-resident framework administered directly by SARS. Under the current process, an individual notifies SARS of the change in residency status by completing and submitting the relevant declaration through the eFiling portal or via email, supported by documentation establishing the basis for ceasing residency [SC5].

When a South African tax resident ceases to be a resident, section 9H of the Income Tax Act deems all worldwide assets to have been disposed of at market value on the day before the date of departure. That deemed disposal crystallises any unrealised capital gains. Excluded from the deemed disposal are South African immovable property (which continues to be subject to South African capital gains tax as a non-resident asset), South African permanent establishment assets, and retirement fund interests. The capital gain arising from the deemed disposal is included in the individual's final South African tax return using the standard 40 percent inclusion rate for individuals, producing an effective maximum rate of 18 percent (40 percent of the 45 percent top marginal rate) [SC5].

For a fuller discussion of the capital gains mechanics, see the South Africa country overview.

Individuals considering cessation of South African tax residency should obtain guidance from a registered South African tax practitioner or Chartered Accountant (CA(SA)) before taking steps that could trigger section 9H or affect exchange control compliance under the Currency and Exchanges Act 9 of 1933.