South Africa\u2019s tax base continues to increase, but many South Africans living abroad are at risk of being taxed by two different authorities. <\/p>\n\n\n\n
South Africa\u2019s income tax base continues to grow, growing from 25.9 million in 2023 to 27.2 million in 2024. <\/p>\n\n\n\n
However, over 38,000 individual taxpayers formally \u2018tax migrated\u2019 between 2017 and 2023.<\/p>\n\n\n\n
The number of taxpayers reporting taxable income of zero or less has also risen by over 550% over the past decade.<\/p>\n\n\n\n
\u201cThese numbers highlight two parallel realities,\u201d said Lance Lawson, Business Development Consultant at Sovereign Trust (SA). <\/p>\n\n\n\n
\u201cOn one hand, more South Africans are registering as taxpayers, but on the other hand, we\u2019re seeing large numbers reporting no taxable income at all, often because they\u2019re working abroad, earning foreign income, or caught in a grey zone between jurisdictions.\u201d<\/p>\n\n\n\n
This has increased questions over dual residency, as well as the use of tiebreaker tests. <\/p>\n\n\n\n
South Africa\u2019s residency-based tax system means that tax residents are taxed on their worldwide income, while non-residents are only taxed on income sourced from South Africa. <\/p>\n\n\n\n
Problems arise when an individual or company is treated as resident in more than one country under each jurisdiction\u2019s domestic law. <\/p>\n\n\n\n
South Africans are thus at risk of being taxed on the same income twice. <\/p>\n\n\n\n
\u201cDual residency is more common than many people realise. It is not only expatriates who have emigrated permanently,\u201d said Lawson. <\/p>\n\n\n\n
\u201cIt could be a professional who spends eight months abroad but still returns to South Africa each year, or a South African owning a business incorporated offshore.\u201d<\/p>\n\n\n\n
Tax residency for individuals in South Africa is determined either by being an ordinary resident or by meeting the physical presence test. <\/p>\n\n\n\n
Ordinary residence is assessed case-by-case, based on a where a person\u2019s true home and life interests are centred. <\/p>\n\n\n\n
When that fails, SARS applies the physical presence test. This generally results in an individual being considered a non-resident if they remain outside the country for a period of 330 days. <\/p>\n\n\n\n
When one breaks residency, this usually triggers an exit tax, including a deemed disposal of worldwide assets for capital gains tax purposes. <\/p>\n\n\n\n
An alternative is to give SARS a tax residency certificate from another country, supported by the necessary documentation.<\/p>\n\n\n\n
The process can often be harder for companies, with residency hinging on either incorporation in South Africa or the location of their place of effective management. Multinationals will often face issues when these criteria differ across jurisdictions.<\/p>\n\n\n\n
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