What Is the Emigration Exit Tax in South Africa?
South Africa imposes an exit tax when you formally cease tax residency. This is a deemed disposal of your worldwide assets at market value on the date you leave. Here is how it works.
Key Takeaways
- Exit tax is triggered when you cease to be a South African tax resident
- SARS treats you as having sold all your assets on the day you leave
- Capital gains tax applies to the deemed disposal
- Property and retirement funds are excluded from the exit tax
- Plan carefully — the exit tax can be substantial for high-net-worth individuals
What triggers exit tax?
Exit tax is triggered when you formally cease to be a South African tax resident. This happens when you emigrate, change your tax domicile to another country, or spend more time abroad than in South Africa under the physical presence test.
- Formally ceasing SA tax residency
- Changing tax domicile to another country
- Failing the physical presence test
- Completing the SARS emigration process (MP336(b) form)
What assets are subject to exit tax?
Most worldwide assets are subject to the deemed disposal. This includes shares, unit trusts, foreign property, and business interests. South African property and retirement funds are excluded.
- Shares and unit trusts: included
- Foreign property: included
- Business interests: included
- South African property: excluded
- Retirement annuities and pension funds: excluded
How to reduce your exit tax
Careful planning before emigration can significantly reduce your exit tax liability. This includes timing your emigration, donating assets to a spouse, and using the annual exclusion and primary residence exclusion.
- Time emigration to maximise annual exclusion
- Primary residence exclusion: R2m gain excluded
- Annual CGT exclusion: R40,000 per year
- Consult a tax advisor before emigrating
- Consider the timing relative to asset values
Ready to see your own numbers?
Use the Emigration Tax Estimator