Exit Tax in South Africa: What to Check Before Leaving

“Exit tax” is not a fixed departure fee. It refers to the potential capital gains tax liability that arises under section 9H of the Income Tax Act when a natural person ceases to be a South African tax resident - a deemed disposal of most worldwide assets occurs on the date residency ends, and CGT is calculated on any resulting gain (SARS: Tax Residency, 2024). The actual amount depends entirely on what you own, your base costs, current values, and which exemptions apply.

Key Takeaways

Section 9H of the Income Tax Act triggers a deemed disposal of most worldwide assets on the date you cease to be a South African tax resident.

South African immovable property is excluded from the deemed disposal - it stays subject to normal CGT on actual sale.

The CGT liability must be declared on your ITR12 for the year in which residency ceases.

Do the asset review and calculation before declaring cessation of residency to SARS - the liability can be significant.

What exit tax actually means

Section 9H of the Income Tax Act 58 of 1962 deems a natural person to have disposed of their worldwide assets at market value on the last day they are a South African tax resident (legislation.gov.za). This applies even if no actual sale takes place. The resulting capital gain - proceeds (market value) minus base cost - feeds into the CGT calculation for that tax year.

Key facts about the s9H deemed disposal:

It applies to most worldwide assets: foreign investments, offshore bank accounts, foreign property, shares (South African and foreign), unit trusts, intellectual property, and retirement interests held in foreign funds.
South African immovable property is excluded from the deemed disposal - it remains subject to South African CGT rules on actual sale, whenever that occurs.
South African retirement fund interests are excluded from the deemed disposal under specific provisions.
The annual CGT exclusion (R40,000 for 2024/2025, or R300,000 in the year of death) applies in the normal way.
The individual inclusion rate of 40% applies to the net gain.

Before ceasing residency: the asset review

The s9H calculation must be done before you make any declaration to SARS. Once you declare cessation of residency, the consequences are triggered. Do this review first:

List all worldwide assets: investments, unit trusts, offshore bank accounts, foreign property, life policies with a surrender value, intellectual property rights, and retirement interests in foreign funds.
Identify South African immovable property separately - it’s excluded from the deemed disposal.
Gather base costs: what did you originally pay for each asset? Include acquisition costs like brokerage fees and transfer costs.
Get current market values: for listed securities, use the closing price on the date of cessation; for unlisted assets and property, an independent valuation may be needed.
Check for a double taxation agreement (DTA): some DTAs between South Africa and the destination country contain provisions that affect how the exit CGT is calculated or which country has the right to tax it (SARS: DTAs).
Get professional advice where total asset values are material - even a preliminary estimate helps identify exposure early.

Records to keep

The exit tax calculation is fact-intensive. Keep the following for at least five years after filing the return:

Travel records: dates, passport pages, visas, lease agreements, and employment contracts documenting the move.
South African and foreign tax returns, assessments, and proof of tax paid.
Bank records, investment statements, and property valuations.
Base cost documentation for every asset included in the deemed disposal.
A written record of the residency cessation date, the assets included, the valuations used, and the calculation method.

Common misunderstandings

Exit tax is not a fixed amount or levy. Some people confuse “exit tax” with a flat fee charged on departure. It’s simply the CGT consequence of the s9H deemed disposal, and for someone with a small or loss-making portfolio, it may be zero.

Leaving South Africa does not trigger the deemed disposal automatically. The deemed disposal occurs on the date you cease to be a South African tax resident - a factual and legal question, not a departure date. Many people live abroad for years while remaining tax residents.

Financial emigration is separate. Financial emigration was an exchange-control process (now largely replaced) for reclassifying funds as non-resident. It is not the same as ceasing income tax residency, and completing one didn’t necessarily complete the other.

Non-residents still owe South African tax on South African-source income. After ceasing residency, South African property income, certain interest, and dividends from South African companies remain subject to South African tax.

Frequently Asked Questions

What assets are included in the deemed disposal when I cease South African tax residency?

Most worldwide assets are subject to the s9H deemed disposal, including foreign investments, offshore bank accounts, shares (SA and foreign), unit trusts, intellectual property, and foreign property. South African immovable property is excluded - it remains subject to normal CGT rules on actual sale. Retirement fund interests held in South African-registered funds are also excluded under specific provisions.

Is exit tax a fixed amount charged when I leave South Africa?

No. Exit tax is not a departure fee. It is the CGT consequence of the section 9H deemed disposal - the tax you may owe on gains that have accrued on your worldwide assets up to the date you cease to be a South African tax resident. For some people the amount is zero (if base costs exceed market values); for others with large investment portfolios it can be significant.

When do I have to declare and pay the exit tax liability?

The s9H deemed disposal creates a CGT event in the tax year in which you cease residency. Declare it on your ITR12 for that year. If you are a provisional taxpayer, estimated payments in the August and February IRP6 periods for that year may also be required. SARS will calculate the final liability on assessment.

Can I defer the exit tax payment?

SARS does not provide a general automatic deferral. If assets cannot be sold to fund the payment - for example, illiquid investments or property - you may face a cash flow challenge. Planning ahead, using the optional third provisional payment, and where necessary engaging with SARS before the deadline are the available options. Professional advice before the date of cessation is strongly recommended.

Sources

SARS: Tax Residency - cessation process, notification requirements, and related guidance
Income Tax Act 58 of 1962, section 9H - the deemed disposal provision for cessation of tax residency
SARS: Capital Gains Tax Guide - CGT rules, exclusions, and inclusion rates that apply to the exit tax calculation

Exit tax consequences are fact-specific and the amounts can be significant. Verify the current SARS position and obtain professional advice before ceasing tax residency or making any declaration to SARS.