SARS is coming after wealthy taxpayers who want to leave South Africa

The South African Revenue Service (SARS) is closing a loophole that prevents wealthy taxpayers who are ceasing their South African tax residency from reducing their overall tax liability.

Tax Consulting SA’s Expatriate Team Lead, Mbalenhle Mahlaba, explained that the government and SARS have moved decisively to shut down a tax planning strategy.

This strategy is particularly popular with high-net-worth individuals who are preparing to cease their South African tax residency.

By using the current donations tax exemption between spouses, these taxpayers can avoid their full income tax liability in South Africa.

However, in the 2026 Budget Review document National Treasury proposed that the donations tax exemption rules applicable to spouses be limited to donations made to a spouse who is a resident, effective from 25 February 2026.

Section 56 of the Income Tax Act exempts donations between spouses from donations tax, meaning asset transfers between spouses generally do not trigger tax, Mahlaba explained.

Treasury stressed the need to limit the donations tax exemption rules where a spouse ceases to be a tax resident after becoming aware of tax avoidance measures around this exemption.

“The arrangement involves deliberately staggering the cessation of tax residence between spouses, where significant assets are transferred to a spouse who has already become non-resident before the remaining spouse ceases residence.”

“In these circumstances, the donations tax exemption applies, while the subsequent cessation of tax residence by the remaining spouse results in a reduced income tax liability under Section 9H of the Act.”

Treasury noted arrangements around donations tax exemption, combined with ceasing to be a South African tax resident, are designed to avoid both donations tax and the income tax on cessation of residency.

According to Mahlaba, these types of tax arrangements undermine the original policy intent of these provisions.

Exit tax

Mahlaba explained that section 9H of the Income Tax Act, commonly known as “Exit Tax”, applies when a South African tax resident ceases to be a resident.

“SARS treats certain qualifying worldwide assets such as shares, investments, and foreign property, but excluding South African immovable property, as if they were sold the day before the taxpayer ceases residency,” she said.

“This triggers a capital gains tax event, whereby the capital gains are taxed accordingly, based on accurate market valuations, historical cost records, and detailed calculations.”

Mahlaba said this is an important consideration when ceasing tax residency, especially now, following Treasury’s latest move to ensure it does not miss out on taxes due by a departing taxpayer.

She urged South Africans who are planning to move abroad to reassess both inter-spousal transfers and the timing of their departure.

“This will require expert guidance to ensure that you are fully compliant, especially if you are planning staggered cessation,” she said.

There are a few key considerations prospective expats should consider before ceasing their tax residency. First, they must confirm their tax compliance and the accuracy of their SSRS profile.

“Before submitting a tax residency cessation application, ensure that your tax affairs are fully up to date,” Mahlaba said.

“This includes filing of all historic and current returns, resolving penalties or assessments, finalising audits or reviews, and verifying that personal, banking, and contact details on SARS eFiling are correct.”

Mahlaba noted that they must also consider that non-resident status requires bank accounts to be converted accordingly.

“Existing savings and investment products can be retained, but access to credit facilities is generally not permitted. All information must be consistent between SARS and financial institutions,” she said.

Finally, prospective expats should note that all offshore transfers remain subject to SARB regulations, including documentation requirements, compliance reporting, and externalisation limits.

“An Approval International Transfer TCS PIN is required for all non-resident transfers. Safeguarding the tax base remains a top priority for SARS, and the new limitation on spousal donations reflects this commitment,” she said.

“In light of this, high-net-worth individuals planning to depart South Africa must carefully manage their tax residency, asset transfers, and compliance with Section 9H to avoid unexpected liabilities.”