Tshepo Khoza, Registered Tax Practitioner
Am I a South African tax resident? (ordinarily resident vs. physical presence)
One of the biggest (and most expensive) mistakes a South African can make is assuming that because they work abroad, they no longer need to pay tax in South Africa.
This is incorrect.
South Africa has a residency-based tax system. This means if you are a "tax resident," you are taxed on your worldwide income, no matter where in the world you earn it.
Whether you are a tax resident is not a choice. It's a fact determined by two legal tests.
Test 1: The "Ordinarily Resident" Test
This is the primary and most common test. It's not about a number of days; it's about your "state of mind."
You are ordinarily resident if South Africa is the country you consider your "true home" or "place of return."
SARS will look at objective factors to determine your intention:
- Where does your immediate family (spouse and children) live?
- Where is your primary home, your car, your belongings?
- Where do you belong to clubs, gyms, or religious organisations?
- Where do you return to after your "wanderings"?
If you are working in Dubai on a 2-year contract but your spouse, children, and house are all in Johannesburg, you are almost certainly "ordinarily resident" in South Africa. Your worldwide income is taxable by SARS.
Test 2: The "Physical Presence" Test
This test only applies if you are not ordinarily resident. It's a simple day-counting exercise.
You are a tax resident under this test if you are physically present in South Africa for:
- More than 91 days in the current tax year; AND
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- More than 91 days in each of the 5 preceding tax years; AND
- More than 915 days in total during those 5 preceding years.
If you meet all three parts of this test, you become a resident. If you fail even one, you are not a resident under this test.
"I'm a Tax Resident... Do I Pay Double Tax?"
Not necessarily.
First, South Africa has Double Taxation Agreements (DTAs) with many countries to prevent you from being taxed twice on the same income.
Second, if you're a tax resident working overseas, you can use the Foreign Income Exemption (Section 10(1)(o)(ii)).
This exemption allows the first R1.25 million of your foreign employment income to be exempt from tax in South Africa, provided you meet a different day-counting test:
- You must be outside of South Africa for more than 183 days in any 12-month period; AND
- At least 60 of those days must be continuous (unbroken).
Example:
You are "ordinarily resident" in SA but work in London. You earn R1.5 million. You are outside SA for 200 days (including a continuous 70-day stretch).
- Your first R1.25 million is exempt.
- You will only be taxed in South Africa on the remaining R250,000.
Conclusion:
You cannot simply "decide" you are no longer a tax resident. To officially cease to be a tax resident, you must either fail the Physical Presence test or undergo a formal process of "financial emigration" to prove you are no longer "ordinarily resident."
Disclaimer: This article is for informational purposes only and does not constitute financial or tax advice. Tax laws are complex and subject to change. We strongly recommend consulting with a registered tax practitioner to address your specific circumstances. TaxClaw.ai is a tool to assist you in managing your tax obligations and is not a substitute for professional advice.