For South African expatriates living overseas, tax filing can be a contentious and often confusing issue. Many expats are uncertain about their tax obligations, and have received conflicting advisory around their obligations, making the looming annual deadline a stressful period. With the filing deadline just days away it is important for South African expats globally to understand whether they need to file a tax return with the South African Revenue Service (“SARS”). 

Understanding Your Tax Status - Residents vs. Non-Residents:

The first key distinction is determining whether you are a tax resident or non-resident in South Africa, and whether this status is formally recognized by the authorities. This is vital, as the tax treatment of individuals varies significantly based on residency. Tax residents are subject to tax on their global income, whereas non-residents are taxed only on income sourced from within South Africa, such as local employment, interest income or property rentals.

Tax Residents:

Expatriates living abroad who are not eligible to cease their tax residency can claim an exemption of up to R1.25 million for employment income earned whilst physically working outside South Africa, during any twelve-month qualifying period. To qualify for this exemption, they must demonstrate that they meet the criteria as stipulated under section 10(1)(o)(ii) of the Income Tax Act. It is important to note that this foreign income exemption applies only to employment income. Any foreign income that does not fall within the definition of employment income will not qualify for an exemption under section 10(1)(o)(ii) of the Income Tax Act and must be evaluated accordingly.  

Non-Tax Residents:

For South African expatriates who have formally ceased their tax residency—either through a Double Taxation Agreement (“DTA”) or financial emigration (“FE”) it is still necessary to file tax returns. This is done to ensure compliance, as cessation of residency does not remove the obligation to file returns but rather to not disclose of foreign income. As such, it is important to submit returns declaring items such as South African sourced income such as local interest, local rental income and local rendered services. 

Compliance Is Key

The burden of proof lies with the taxpayer, as such expatriates must ensure they provide accurate information to SARS, backed by supporting documentation. Failing to file a return or updating tax residency status could lead to penalties or criminal sanctions. Given expatriate tax obligations can be complex, seeking professional advice is strongly recommended to avoid compliance risks and ensure all obligations are met effectively in the 2024 filing season.

Written by Mbalenhle Mahlaba, Consultant: Expatriate Tax, at Tax Consulting SA