What is financial emigration and tax residency?
True "financial emigration" through the Reserve Bank ended in March 2021. Today, the legal process of moving your financial life abroad is a tax process managed by the South African Revenue Service (SARS), known as "ceasing tax residency".
When a person successfully ceases their tax residency, SARS loses the right to tax their worldwide income. In exchange, the individual pays a final capital gains tax on their qualifying assets, known as an exit tax.
The end of financial emigration
People often use the term "financial emigration" when moving abroad. However, that specific exchange control process was officially retired by the South African Reserve Bank in 2021.
Today, formally breaking financial ties with South Africa is entirely a tax process. It is officially called ceasing tax residency. This change is purely financial; changing tax residency does not affect a person's legal citizenship, and they keep their South African passport and ID book.
The residency tests
By default, a South African tax resident is taxed on their worldwide income, regardless of where they live. To stop this, an expatriate must prove to SARS that they no longer meet two legal tests:
- The ordinarily resident test: this assesses where a person considers their true, permanent home. SARS looks at where the person's family lives, where their main bank accounts are, and where they ultimately intend to retire.
- The physical presence test: a strict mathematical formula that counts the exact number of days a person has spent inside South Africa over the current and previous five tax years.
The exit tax (deemed disposal)
SARS does not allow a taxpayer to leave the tax net for free. When a person officially ceases tax residency, it triggers a capital gains tax event under Section 9H of the Income Tax Act, commonly known as an exit tax.
The law treats the individual as if they sold all their qualifying worldwide assets — such as shares, offshore portfolios, and unit trusts — on the exact day before they ceased residency. Even though the assets were not physically sold for cash, SARS taxes the paper profit.
Physical real estate (immovable property) located in South Africa is exempt from this specific exit calculation, as it remains subject to South African tax whenever it is eventually sold.
The three-year retirement lock
Many expats want to cash out their South African retirement funds when they move. Once a person is a non-resident for tax purposes, they are eventually allowed to withdraw their company pension, provident fund, or private retirement annuity in full.
However, the law enforces a strict waiting period. An individual must prove to SARS that they have maintained their non-resident tax status for three consecutive years before they are legally allowed to unlock and withdraw these retirement savings.
Ongoing taxes for non-residents
Ceasing tax residency successfully stops SARS from taxing a person's foreign salary and global investments. However, the taxpayer is not entirely removed from the South African tax system.
If the non-resident continues to earn money that is sourced inside South Africa — such as rent collected from a local property or dividends from local companies — they are still legally required to file a South African tax return every year and pay tax on that specific local income.
Terms used on this page
- South African Reserve Bank (SARB)
- The central bank of South Africa, responsible for managing the country's money supply and protecting the value of the Rand.
- exit tax
- A capital gains tax triggered when a person ceases South African tax residency, treating their qualifying assets as if they were sold at market value on the day before they left.
- assets
- What you own that has value — property, savings, investments, retirement funds, a business.
Sources
Reviewed July 2026