Sars quietly fixes a big headache for South Africans who emigrate

The 2026 tax filing season has brought a number of welcome improvements, but one of the most significant has largely gone unnoticed.

For South Africans who cease to be South African tax resident during the tax year, the South African Revenue Service (Sars) has finally automated a process that until now has been one of the most frustrating aspects of formally ‘tax emigrating’ from South Africa.

Read/listen:
The hidden tax costs of leaving SA
Sars crackdown targets expats moving money offshore

For years, taxpayers and tax practitioners have battled with the way Sars processed returns where an individual ceased South African tax residency partway through a year of assessment.

The law has always been clear. The administration of that law has been anything but.

To understand why these changes matter, it helps to understand what happens when someone ceases to be a South African tax resident.

For tax purposes, you effectively ‘die’ as a South African tax resident and are immediately ‘reborn’ as a non-resident.

Before your date of exit, South Africa taxes you as a resident on your worldwide income.

From the following day, South Africa generally taxes you only on income from South African sources. Although it is one tax year, it effectively has to be split into two distinct tax periods, each governed by different tax rules.

This creates real complexity. Certain exemptions and rebates must be apportioned between the resident and non-resident periods. Foreign income earned before and after the cessation date may require different tax treatment.

‘Exit tax’

In many cases, ceasing to be South African tax resident also triggers a deemed disposal of worldwide assets, commonly referred to as the ‘exit tax’. In effect, Sars must perform two separate tax calculations before arriving at the taxpayer’s final liability.

Historically, this process was largely performed manually by Sars officials after the return had been submitted.

Practitioners frequently encountered assessments containing computational errors, incorrect allocations of income, or incorrectly apportioned exemptions.

ADVERTISEMENT

CONTINUE READING BELOW

It was not uncommon for an assessment to be revised multiple times before the correct liability was finally determined, with taxpayers often forced to lodge objections simply to correct arithmetic or processing errors rather than genuine disputes over the law.

The result was delays, unnecessary correspondence with Sars and significant uncertainty for taxpayers who had already gone through the considerable administrative process of formally ceasing tax residency.

Welcome change

The 2026 filing season appears to mark a significant shift.

Sars has substantially enhanced the tax returns for taxpayers whose residency changes during the year, incorporating dedicated fields for both the resident and non-resident periods, with the tax calculation now performed separately for each.

For taxpayers, that should mean fewer processing delays, fewer manual interventions by Sars officials, and – hopefully – fewer incorrect assessments requiring revision or objection.

It is also indicative of a broader trend. Sars has invested heavily in modernising its digital systems and making greater use of third-party data to automate tax administration.

This latest enhancement demonstrates that those investments are beginning to translate into tangible improvements for taxpayers.

That said, taxpayers should not assume the new filing process removes the need for careful tax planning or professional advice.

The most important issue remains determining the correct date on which South African tax residency ceased.

This is a legal and factual enquiry that depends on an individual’s circumstances and, in many cases, the application of a double taxation agreement between South Africa and another country.

Read: Sars tightens scrutiny of double tax agreement non-resident claims

ADVERTISEMENT:

CONTINUE READING BELOW

Getting the date wrong can have significant consequences, particularly where the deemed disposal of assets under the exit tax provisions is involved.

It is equally important to understand that ceasing tax residency opens the door to an entirely different set of tax rules.

Many taxpayers assume every rand they earn or every investment they retain in South Africa continues to be taxed in exactly the same way. That is often not the case.

Non-residents may qualify for exemptions unavailable to residents, such as the exemption on certain interest earned from South African banks.

A double taxation agreement may also fundamentally alter how South African-source income is taxed, determining whether South Africa retains taxing rights at all or whether those rights pass exclusively to the taxpayer’s new country of residence.

Common issue

One common issue the Institute for International Tax and Finance deals with often is where an individual relocates overseas but continues working remotely for a South African employer while settling into their new country.

Employers frequently continue withholding pay-as-you earn (PAYE) tax simply because the employee remains on the South African payroll.

However, where the services are physically performed outside South Africa after tax residency has ceased, the remuneration will often fall outside the South African tax net.

Recovering PAYE that should never have been withheld can still be a lengthy and frustrating process, even with the improvements to the 2026 return.

Sars’s enhancements to the 2026 return are therefore a welcome and overdue improvement. They should meaningfully reduce the administrative burden of filing in the year tax residency ceases.

But while completing the return may now be simpler, understanding the tax consequences of becoming a non-resident remains just as important as ever.

Michael Kransdorff is CEO of the Institute for International Tax and Finance. 

#Sars #quietly #fixes #big #headache #South #Africans #emigrate