South Africa Taxes for US Expats: A Comprehensive Guide

Living as an Expat in South Africa

South Africa has much to offer US expats, including gorgeous beaches, a relatively low cost of living, great weather year-round, and plenty of professional opportunities. 

Whether you’ve relocated to South Africa permanently or are staying there long-term for work, it’s essential to make the most of this exciting opportunity. One way to make life a little easier while abroad is to brush up on South African taxes for US expats.

When you left the US, you may have thought that your days of filing annual returns with the IRS were behind you. However, as a US citizen, you must file taxes with the United States government. You must also fulfill your tax obligations in your host nation to avoid incurring any fines or penalties.

Don’t worry — paying taxes to two separate nations and filing a pair of returns isn’t nearly as difficult or expensive as you might expect. By familiarizing yourself with tax requirements for Americans working in South Africa, you can minimize your US tax bill, avoid double taxation, and get both returns filed on time. 

With that in mind, here’s what you need to know about South Africa’s taxes for US expats. This comprehensive guide covers everything from the tax rate for foreigners in South Africa to various deductions you might be eligible for.

South Africa at a Glance

US Expat Taxes in South Africa

South Africa uses what’s known as residency-based taxation. This means that the income tax rate South Africa charges expats is determined by individual residency status, not whether they become citizens. If an expat meets residency requirements, they will be taxed at the same rate as South African citizens. 

Whereas South Africa engages in residency-based taxation, the US uses a citizenship-based model, meaning Americans working abroad must continue filing US returns and claiming all worldwide income, even if they pay taxes in another country. 

What does this mean for you? Simple — you must file two sets of returns and potentially pay both a South Africa and US tax bill.

As you know, the US tax year runs from January 1st to December 31st, with the tax deadline typically falling in mid-April. For 2024, the filing deadline is April 15th. However, as an expat, you’re eligible for an automatic extension pushing your deadline to June 15th.

The South Africa tax year runs from March 1st to February 28th of the following year, and the filing deadline is November 16th. 

Who Has to File Taxes in South Africa?

Residents and non-residents earning an income in South Africa are required to file taxes in South Africa, just like South African citizens. These taxes must be filed by the November 16th deadline.

South Africa taxes income on a progressive scale adjusted yearly to account for inflation.

The key dates for the 2023 filing season are:

• For individual taxpayers (non-provisional): The filing season runs from 7 July 2023 to 23 October 2023.
• For provisional taxpayers: The filing season extends from 7 July 2023 to 24 January 2024.

There’s no tax-exempt tier under South African tax law. Even if you fall into the lowest income bracket, you’ll pay a standard 18% income tax.

Who Qualifies as a Tax Resident in South Africa?

South Africa applies two different rules to determine residency status for tax purposes. The first is known as the physical presence rule. South Africa’s physical presence rule is a bit more complex than similar rules used by other nations.

Typically, a country will consider whether you were physically present during the current tax year and potentially the previous one. Generally, the host nation requires you to be present within the country for at least 183 days of the current tax year.

However, South Africa considers your physical presence over the previous five years when determining residency status. 

For example, let’s say you were in South Africa for less than 183 days during the current tax year. You could still be considered a resident under the physical presence rule if you were in the country for at least 915 days over the previous five tax years (915 aggregate days average out to 183 days per year).

To qualify under this rule, you must be present in South Africa for more than 91 days during the current tax year and meet the aggregate threshold of 915 days or more.

The second regulation, the ordinary resident rule, is much simpler. Under this regulation, you’d qualify as a resident if you’ve established your full-time home in South Africa.

You must demonstrate this fact by making financial and personal commitments to the nation. For instance, opening a bank account there and purchasing a primary residence would demonstrate compliance under the ordinary resident rule.

What Types of Taxation Does South Africa Have?

For the 2023 tax year in South Africa, both residents and non-residents who earn income in the country are required to file taxes. However, the requirement to submit a tax return depends on certain conditions. Individuals with gross income exceeding specific thresholds must file a return:

• ZAR 91,250 for individuals under the age of 65 at the end of the year of assessment.
• ZAR 141,250 for individuals aged 65 to under 75.
• ZAR 157,900 for those 75 years or older.

In addition to an income tax, South Africa levies several other types of taxes, including:

• Capital gains tax
• Estate tax
• Transfer Duty
• Social security
• Rental income
• Investment Income

The country taxes many of the same income sources as the United States; however, the tax rate imposed on most of these income sources is much higher. That’s why you must take steps to avoid double taxation by taking advantage of all applicable US deductions.

What Tax Forms Do Americans Living in South Africa Have to File?

As an individual working in South Africa, the primary tax form you’ll need to complete is an Income Tax Return form, also known as an ITR12. This form, and any others you’re required to file, must be submitted to the South African Revenue Service (SARS). 

Additionally, you’ll need to complete and file various US tax forms with the IRS. The standard form you’ll need to submit is Form 1040. This document is used to claim all global income, including that earned from employment and other activities conducted in South Africa.

A few other forms you may need to file include the following:

• Form 2555: This form is used to claim your Foreign Earned Income Exclusion and Foreign Housing Exclusion 
• Form 1116: This form is used to claim Foreign Tax Credits
• Form 8938: This form is used to disclose various foreign income and demonstrate compliance with the Foreign Account Tax Compliance Act (FACTA)
• Form 5471: This disclosure form is required if you have an ownership interest in any foreign corporation, but it isn’t used to tax the company in any way

Keep in mind that you won’t need all of these forms. Most expats only need a handful of commonly used forms, such as Forms 1040 and 2555.

Does the US Have a Tax Treaty with South Africa?

Yes, there is a South Africa-US tax treaty in place. This treaty is designed to reduce your exposure to double taxation and protects US expats and American corporations doing business in South Africa.

The United States has tax treaties with dozens of nations, and each treaty’s specific provisions and protections vary greatly. Therefore, it’s recommended that you consult with an experienced tax firm to understand precisely how the South Africa-US tax treaty impacts your income tax liability. 

Does South Africa Have a Totalization Agreement with the US?

There is no South Africa-US totalization agreement. An absence of a totalization agreement could impact both your tax bill and your ability to claim Social Security benefits.

Social Security for US expats is another complex topic you should consider when establishing tax residency in a foreign country, especially if you plan on using Social Security benefits to cover essential living expenses.

Although there’s no South Africa-US totalization agreement, your chances of being double-taxed are low, as the IRS only requires select individuals to pay Social Security taxes when living and working abroad. You don’t have to pay Social Security taxes when working for entities based outside of the US, such as a South African company.

Navigating Tax Compliance for US Expats in South Africa

Our guide has provided helpful tips on organizing and filing South African taxes for U.S. expats. If you still have questions or need personalized support, Greenback Expat Tax Services has a team of expert expat tax professionals ready to assist you.

If you’re ready to be matched with a Greenback accountant, click the get started button below. For general questions on expat taxes or working with Greenback, contact our Customer Champions.