The R1.25 million foreign employment income exemption is worth less to a South African in Dubai than to a South African almost anywhere else. The exemption caps at R1.25 million, and relief above that cap comes from section 6quat, which credits foreign tax actually paid. The UAE charges no personal income tax, so there is nothing to credit and every rand above R1.25 million is taxed at full South African rates with no offset at all.
That is the arithmetic behind the decision most South Africans in the UAE eventually face: stay a South African tax resident and accept the exposure, or cease residency and accept a deemed disposal of your worldwide assets on the day before you go. This guide covers both tests for residency, how ceasing actually works at SARS, section 9H, the SA-UAE treaty route, and the three-year rule on retirement funds.
Two Ways to Be a South African Tax Resident, Two Ways Out
South Africa moved to residence-based taxation on 1 March 2001. A resident is taxed on worldwide income; a non-resident only on income from a South African source. SARS recognizes two routes into residency: being ordinarily resident, a common-law concept, or meeting all three legs of the physical presence test.
Ordinary residence is described by SARS as the country to which you will naturally and as a matter of course return after your wanderings, your usual or principal residence, your real home. There is no day count attached to it and no bright line, which is why it is the harder of the two to shed.
What is the difference between ordinarily resident and physically present?
Ordinary residence is about where your life is centered and applies regardless of days. The physical presence test is a mechanical day count that catches people who are not ordinarily resident but keep spending substantial time in South Africa. You only reach the physical presence test if you fail the ordinary residence test, and meeting either one makes you resident.
The Physical Presence Test: 91, 91 and 915
SARS states that to meet the physical presence test you must be physically present in South Africa for periods exceeding all three of the following:
- 91 days in total during the year of assessment under consideration
- 91 days in total during each of the five years of assessment preceding that year
- 915 days in total across those five preceding years
Fail any one of the three and the test is not met. There is also a release valve: anyone who meets the physical presence test but is then outside South Africa for a continuous period of at least 330 full days ceases to be a resident from the day they left.
The 330-day rule is clean and mechanical, and it is the reason many South Africans in the UAE plan their first year abroad without a trip home. It applies only to residence acquired through the physical presence test, not to ordinary residence.
Ceasing to Be Ordinarily Resident Is a Motivation Letter, Not a Form
SARS describes ceasing ordinary residence as a factual enquiry into whether your subjective intention to stop treating South Africa as your real home is supported by objective factors. The declaration is made through the RAV01 form on eFiling by capturing the date you ceased residency under Income Tax Liability Details.
Filing the date opens a case. SARS sends a letter asking for supporting documents, and the standard requirements are a signed declaration, a letter of motivation setting out the facts in detail, and a copy of your passport or travel diary including every page showing entry and exit stamps.
| What SARS asks for | What a strong answer looks like in the UAE |
|---|---|
| Type of visa in the foreign country | A residence visa tied to employment, investment, or a Golden Visa, not a visit visa |
| Proof of permanent residence abroad, if applicable | Emirates ID and residence visa page |
| Certificate of tax residence from the foreign authority | A UAE tax residency certificate from the Federal Tax Authority |
| Property still available in South Africa and its purpose | Either sold, or let on a documented arm’s-length lease with the purpose stated |
| Business interests, including investments and employment | A full schedule. Retained interests are not fatal, but omitting them is |
| Family details and why any member remains | Spouse and children relocated, or a stated reason such as a child completing matric |
| Social interests and location of personal belongings | Gym and club memberships cancelled, household goods shipped |
| Return visits, frequency and reason | A short honest list. Frequent long visits undercut the whole application |
SARS declines a declaration if you do not meet the criteria, or if you cannot supply the relevant material it asks for. Both refusal grounds are about evidence, which is why the motivation letter carries more weight than any single document in the bundle.
Financial emigration is not the same thing
SARS is explicit on this point: obtaining Reserve Bank approval to emigrate financially is not connected to your tax residence. It is merely one factor among many. Your tax residence is not automatically broken when you emigrate financially, and the deciding factor remains whether you ceased to be ordinarily resident.
Section 9H: The Deemed Disposal on the Day You Cease
SARS states that a deemed disposal for capital gains tax purposes takes place at the time you break your tax residence, and that you are deemed to have disposed of your worldwide assets, excluding immovable property situated in South Africa.
The exclusion is the important half. South African property stays inside the South African net whether you are resident or not, so it is not part of the exit charge. Everything else is: offshore investments, shares in foreign companies, cryptocurrency, foreign property, and your listed South African share portfolio.
SARS asks for a detailed capital gains tax calculation schedule relating to the deemed disposal on the day before you ceased residency, as part of the supporting documents for a non-resident international transfer application. That calculation has to exist and be defensible before you try to move money.
The R1.25 Million Exemption Is Worth Less in the UAE
Section 10(1)(o)(ii) exempts foreign employment income if you are outside South Africa for more than 183 full days in any 12-month period and for a continuous period exceeding 60 full days within that same 12 months. Since years of assessment commencing on or after 1 March 2020, only the first R1.25 million of foreign employment income qualifies. Anything above is taxed under the normal tables.
SARS itself sets out the double taxation problem: if you earn above R1.25 million and the treaty does not give a sole taxing right to one country, both can tax the excess. Relief comes through section 6quat, which is a credit for foreign tax paid.
Why the UAE is the worst case for this exemption
A South African tax resident working in London pays UK tax on the excess and credits it against the South African liability. A South African tax resident working in Dubai pays nothing locally, so the section 6quat credit is zero and the full South African rate applies to every rand above R1.25 million. The zero-tax jurisdiction that made the move attractive is precisely what removes the relief. Kenya has no cessation procedure at all, and a single visit home with a permanent home still available makes you resident for the whole year: see Kenyan tax residency and what KRA still charges. Italians face a harder exit, because Italy presumes citizens who move to the UAE remain resident unless they prove otherwise: see AIRE and the Italian blacklist presumption.
| Taxable income, 2027 tax year | Rate |
|---|---|
| R1 to R245,100 | 18 percent of taxable income |
| R245,101 to R383,100 | R44,118 plus 26 percent above R245,100 |
| R383,101 to R530,200 | R79,998 plus 31 percent above R383,100 |
| R530,201 to R695,800 | R125,599 plus 36 percent above R530,200 |
| R695,801 to R887,000 | R185,215 plus 39 percent above R695,800 |
| R887,001 to R1,878,600 | R259,783 plus 41 percent above R887,000 |
| R1,878,601 and above | R666,339 plus 45 percent above R1,878,600 |
The 2027 tax year runs 1 March 2026 to 28 February 2027. The primary rebate is R17,820 and the tax threshold for someone under 65 is R99,000, per the SARS rates of tax for individuals.
The exemption also does not reach everyone. It applies to remuneration, so an independent contractor is outside it, and it excludes public sector employees and holders of public office appointed under an Act of Parliament.
The SA-UAE Treaty Route, and Why It Works Where Canada’s Does Not
South Africa and the UAE have a double taxation agreement, published in Government Gazette 40496 and in force since November 2016. Its residence article defines a UAE resident individual as any individual who, under the laws of the United Arab Emirates, is considered a resident there by reason of domicile, residence, place of management, or any other criterion of a similar nature.
That wording is broad. It turns on UAE law, not on UAE nationality, so a South African holding a UAE tax residency certificate can genuinely be a treaty resident of the UAE and use the tie-breaker.
SARS accepts this as a third qualifying basis for ceasing residency: an individual who becomes a tax resident of another country through the application of a double tax agreement also ceases to be a South African resident, and the only extra document required is a certificate of tax residence from the foreign authority.
A contrast worth knowing about
Not every UAE treaty is drafted this way. The Canada-UAE convention limits its UAE residence definition for individuals to UAE nationals, which shuts Canadian expatriates out of the treaty entirely. Our guide to Canadian departure tax and residency sets out what that costs them. South Africans have the better treaty, and should use it.
Approval for International Transfers Before Money Moves
Ceasing residency is not the last step. Moving capital out requires a tax compliance status for international transfers, and SARS asks non-residents for proof that they ceased to be a resident including the exact date, and the detailed section 9H capital gains calculation.
You also need relevant material demonstrating the source of the capital, and a statement of assets and liabilities for the previous three tax years, disclosing all investments, loan accounts and distributions from local and foreign companies and trusts.
If a non-resident is not registered on the SARS database at all, the TCS route is unavailable and the application goes through a Manual Letter of Compliance by email instead. Applications for a family unit have to be made separately by each member who is registered for tax.
The UAE end of the same transfer has its own reporting and compliance layer, covered in moving large sums out of the UAE. Your UAE bank is separately reporting your account to SARS through the Common Reporting Standard, which is explained in FATCA and CRS reporting by UAE banks.
Retirement Funds and the Three-Year Rule
Access to South African retirement savings after ceasing residency depends on which component of which fund you are asking about, and SARS sets the rules out component by component.
| Component and fund type | Three-year non-residence required |
|---|---|
| Savings component, any retirement fund | No |
| Vested component, pension fund and provident fund | No |
| Vested component, pension or provident preservation fund | No, unless a once-off withdrawal has already been taken from that fund |
| Vested component, retirement annuity fund | Yes, an uninterrupted period of at least three years |
| Retirement component, any retirement fund | Yes, an uninterrupted period of at least three years |
The word that does the work is uninterrupted. Reinstating South African tax residency at any point, even briefly, restarts the clock, which matters to anyone considering a temporary move home. What replaces this while your funds are locked is covered in our guide to saving and investing as a UAE expat.
The Order to Do This In
- Decide which basis you are ceasing on. Ordinary residence, the physical presence test with 330 continuous days, or the treaty. The document bundle differs for each.
- Get the UAE tax residency certificate first if you are going the treaty route. It is the only extra document SARS asks for on that basis, and it is the strongest single item on the ordinary-residence basis too.
- Build the section 9H calculation before you file the RAV01, not after SARS asks. You need asset values as at the day before cessation and they get harder to evidence with time.
- Capture the cessation date on the RAV01 and expect a supporting-documents letter.
- Write the motivation letter properly. It is the document SARS reads first and the one most declines turn on.
- Only then apply for the international transfer approval, with the three years of assets and liabilities statements and the source-of-capital evidence.
What We Could Not Verify
SARS publishes Interpretation Note 3 on ordinary residence and Interpretation Note 4 on the physical presence test, but its interpretation notes index returned a 404 during our research, so we have relied on the summaries SARS publishes on its cease-to-be-a-resident and foreign employment income exemption pages rather than the notes themselves. If ordinary residence is genuinely arguable in your case, read both notes in full before filing.
SARS’s foreign employment income exemption page still links to Interpretation Note 16 (Issue 4), dated 28 June 2021, as its current guidance on section 10(1)(o)(ii). We have not found a later issue, but a five-year-old interpretation note on a provision this heavily litigated is worth checking for updates before you rely on it.
The retirement fund access rules above are quoted from SARS’s own note within the AIT supporting-documents page. Fund administrators apply their own procedures on top, so confirm with your administrator what evidence they require before assuming a withdrawal will be processed.
Frequently Asked Questions
Do I stop paying South African tax automatically when I move to Dubai?
No. South Africa taxes residents on worldwide income, and you remain a resident until you cease to be ordinarily resident, fail the physical presence test, or become a treaty resident elsewhere. Moving abroad without ceasing residency leaves your Dubai salary inside the South African net, subject only to the R1.25 million exemption.
How does the physical presence test work?
You must exceed all three legs: more than 91 days in the year of assessment, more than 91 days in each of the five preceding years, and more than 915 days across those five preceding years. Failing any one leg means the test is not met. Someone who meets it but is then outside South Africa for a continuous 330 full days ceases to be a resident from the day they left.
Is financial emigration the same as ceasing tax residency?
No. SARS states that Reserve Bank approval to emigrate financially is not connected to tax residence and is merely one factor. Tax residence is not automatically broken by financial emigration, and the deciding question remains whether you ceased to be ordinarily resident.
What is the R1.25 million exemption and does it help in the UAE?
Section 10(1)(o)(ii) exempts the first R1.25 million of foreign employment income if you are outside South Africa for more than 183 full days in any 12 months, including a continuous period exceeding 60 full days. It helps less in the UAE than elsewhere, because relief above the cap comes from a credit for foreign tax paid, and the UAE charges no personal income tax to credit.
What is the exit tax when I cease South African tax residency?
A deemed disposal under section 9H. You are treated as having disposed of your worldwide assets at the time you break residency, excluding immovable property situated in South Africa, and capital gains tax applies to the resulting gain even though nothing was sold.
Does a UAE tax residency certificate help my SARS application?
Yes, materially. It is one of the factors SARS lists for ceasing ordinary residence, and it is the sole extra document required if you cease on the basis of the double tax agreement. The SA-UAE treaty defines a UAE resident individual by reference to UAE law rather than UAE nationality, so a certificate does real work.
Can I withdraw my retirement annuity after leaving South Africa?
Only from the savings component immediately. Access to the vested component of a retirement annuity fund, and to the retirement component of any fund, requires you to have been a non-tax resident for an uninterrupted period of at least three years.
How do I tell SARS I have ceased to be a resident?
Through the RAV01 form on eFiling, capturing the cessation date under Income Tax Liability Details. SARS then opens a case and issues a letter requesting supporting documents, which always include a signed declaration, a detailed letter of motivation, and passport pages showing entry and exit stamps.
Do I need SARS approval to move money out of South Africa?
Yes. Non-residents need a tax compliance status for international transfers, supported by proof of the date they ceased residency, the detailed section 9H capital gains calculation, source-of-capital evidence, and statements of assets and liabilities for the previous three tax years. Non-residents not registered on the SARS database apply for a Manual Letter of Compliance instead.
What happens to South African property after I cease residency?
It stays taxable in South Africa. Immovable property situated in South Africa is expressly excluded from the section 9H deemed disposal, and South African source income including rental income remains taxable in South Africa whether you are resident or not.
Official Sources
- SARS – Cease to be an SA tax resident and reinstatement of SA tax resident
- SARS – Foreign employment income exemption, section 10(1)(o)(ii)
- SARS – Tax and non-residents, including the physical presence test
- SARS – Supporting documents for approval of international transfers
- SARS – Rates of tax for individuals, 2027 tax year
- SARS – International treaties and agreements, including the SA-UAE double taxation agreement
Information current as of September 2026. Ceasing South African tax residency triggers a capital gains charge and is difficult to reverse. Confirm your position with a South African tax practitioner before filing the RAV01.
