Moving to Saudi Arabia from South Africa: SARS, Tax Exit, and Financial Considerations

Why South African Expats In Saudi Arabia Need A Different Conversation

South Africans form one of the most significant professional expat groups in Saudi Arabia, particularly in engineering, infrastructure, energy, construction, healthcare, and senior project roles.

Many arrive with:

• High earnings potential
• Long international career horizons
• Existing offshore exposure
• A complicated relationship with South Africa’s tax system

That last point matters.

South Africa does not treat emigration, residency, or offshore income in the same way as the UK, Europe, or Australia. Moving to Saudi Arabia does not simply remove South African tax considerations. In many cases, it brings them to the surface.

This article is written specifically for South African nationals and South Africa–connected individuals moving to or living in Saudi Arabia. It focuses on how SARS views residency, exit, and offshore exposure, and why assumptions that work elsewhere often fail in a South African context.

The Most Dangerous Assumption South Africans Make

The most common assumption among South African expats moving to Saudi Arabia is:

“Saudi is tax-free, so SARS no longer applies.”

This assumption is widespread. It is also frequently wrong.

South Africa does not tax based on where income is earned alone. It taxes based on tax residency, which is determined primarily by:

• Ordinary residence
• Physical presence

Saudi residency does not automatically sever either.

This is where many South Africans run into difficulty years later, often when:

• Accessing offshore funds
• Drawing retirement assets
• Selling investments
• Attempting to formalise non-residency retrospectively

Ordinary Residence: The Concept Most Expats Misunderstand

For SARS, the primary test of tax residency is ordinary residence.

This is not a mechanical day-count test. It is a factual assessment of where a person’s “real home” is considered to be, based on intention and behaviour over time.

Factors SARS may consider include:

• Where you regard as home
• Where your family lives
• Where personal belongings are kept
• Where long-term plans point
• Whether South Africa remains the place you naturally return to

You can live and work in Saudi Arabia for years and still be considered ordinarily resident in South Africa if those factors point back there.

Saudi residency does not override this test.

Physical Presence: Not A Safe Fallback

If ordinary residence does not apply, SARS may look to the physical presence test.

This test considers:

• Days spent in South Africa in the current tax year
• Days spent over the preceding five tax years
• Whether minimum thresholds are exceeded

Many expats assume that physical absence alone is enough to break South African tax residency.

In practice:

• The thresholds are cumulative
• Travel patterns matter
• Timing of departure matters
• Residency can be reinstated if presence resumes

Physical presence is not a clean escape route. It is a secondary test with its own complexity.

Why Saudi Arabia Complicates South African Tax Planning

Saudi Arabia does not tax employment income for expatriates. That makes Saudi postings attractive to South Africans seeking income certainty.

However, South Africa’s system does not align neatly with that reality.

Saudi:

• Does not tax foreign income
• Does not tax capital gains for expats
• Does not require personal income reporting

South Africa:

• Taxes residents on worldwide income
• Maintains reporting expectations
• Scrutinises offshore assets closely
• Applies exchange control logic alongside tax

The result is a gap between what feels simple locally and what remains complex elsewhere.

Foreign Employment Income: Where Confusion Often Starts

Many South Africans assume that earning income outside South Africa automatically removes it from SARS’ reach.

That is not always the case.

If you remain tax resident:

• Foreign employment income may still be taxable
• Exemptions may apply, but only under specific conditions
• Reporting obligations often remain

Saudi’s lack of income tax does not determine how SARS treats that income. Residency does.

This is why clarity on residency status is more important than the location of employment.

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Offshore Assets And The South African Mindset

South Africans are often more offshore-aware than other expat groups.

Many already hold:

• Offshore bank accounts
• Foreign investment portfolios
• International retirement structures

This awareness can be helpful. It can also create overconfidence.

South Africa has extensive:

• Reporting requirements
• Disclosure expectations
• Information exchange mechanisms

Saudi residency does not insulate offshore assets from SARS scrutiny if residency has not been clearly addressed.

Exchange Control Thinking Still Influences Outcomes

Although South Africa has relaxed many exchange control rules, the logic of capital movement still influences how SARS views offshore arrangements.

Issues that often arise include:

• Whether assets were legitimately externalised
• Whether disclosures were made correctly
• How offshore growth is treated
• Whether structures align with stated residency status

These questions are rarely raised while income is flowing smoothly. They arise when assets are accessed or moved.

Why South African Expats Often Discover Problems Late

Many South African expats in Saudi report that “everything seemed fine” for many years.

Issues typically surface:

• When formalising non-residency
• When accessing offshore capital
• When returning to South Africa
• When retiring
• When estates are administered

The delay is structural. Saudi creates a quiet environment where unresolved questions can sit unnoticed.

South African Tax Residency Does Not End Because You Leave

One of the most persistent misunderstandings among South Africans moving to Saudi Arabia is the belief that physical departure automatically ends South African tax residency.

For SARS, tax residency ends only when:

• You cease to be ordinarily resident, or
• You no longer meet the physical presence test

Neither outcome occurs automatically.

Saudi residency, employment, or visas do not determine South African tax residency. SARS looks at facts, behaviour, and intention, often retrospectively.

This is why clarity before and during a Saudi posting matters far more than explanations after the fact.

Ceasing To Be “Ordinarily Resident”: What SARS Actually Looks For

Ordinary residence is the primary test SARS applies.

It asks where you consider your real home to be, and where you naturally return to when not working elsewhere.

SARS may consider factors such as:

• Whether South Africa remains the country you intend to return to permanently
• Where your family is based
• Where personal belongings are kept
• Whether South African property remains available
• How long you intend to live abroad
• Whether the move is open-ended or project-based

Living and working in Saudi Arabia for many years does not, on its own, prove that ordinary residence has ceased.

Actions carry more weight than statements.

The Physical Presence Test: A Secondary But Risky Fallback

If ordinary residence cannot be clearly demonstrated as having ended, SARS may apply the physical presence test.

This test considers:

• Days spent in South Africa in the current year
• Days spent in South Africa over the preceding five years
• Whether statutory thresholds are exceeded

Many expats underestimate how easily these thresholds can be breached through:

• Regular business travel
• Family visits
• Unplanned returns
• Transitional years before and after departure

Physical presence is cumulative. A few extra visits over several years can undo assumptions about non-residency.

Formal Tax Exit Versus De Facto Non-Residency

South Africans often hear the phrase “financial emigration,” but its meaning has evolved.

Today, the key issue is not a label, but whether SARS accepts that you have ceased to be tax resident.

Formal processes may involve:

• Declaring a change in tax residency
• Submitting relevant SARS forms
• Demonstrating cessation of ordinary residence
• Addressing exit tax implications on certain assets

Informal non-residency based on assumption is far more likely to be challenged later.

Saudi’s tax neutrality does not remove the need for clarity here.

Exit Tax: When It Applies And Why It Surprises People

When a South African ceases to be tax resident, SARS may deem certain assets to have been disposed of at market value.

This can trigger capital gains tax on:

• Certain investments
• Offshore assets
• Equity interests

Not all assets are affected, and exemptions may apply, but the principle often comes as a surprise.

Many expats only become aware of exit tax after years abroad, when they attempt to formalise non-residency.

Understanding this before a Saudi move allows for informed decision-making rather than reactive compliance.

Foreign Employment Income And The Limits Of Exemptions

South Africa provides limited exemptions for foreign employment income, subject to conditions.

These exemptions:

• Are not automatic
• Depend on time spent outside South Africa
• Do not apply if residency is not broken
• May not cover all income types

Saudi Arabia does not tax employment income for expatriates. That does not mean SARS will ignore it.

Residency status remains the determining factor.

Offshore Investments And Ongoing Reporting Obligations

South Africans often hold offshore assets long before moving to Saudi Arabia.

Common structures include:

• Offshore bank accounts
• Foreign investment portfolios
• International trusts or companies
• Externalised retirement assets

If you remain tax resident:

• Offshore income may still be taxable
• Reporting obligations continue
• Disclosure requirements remain

Saudi residency does not insulate offshore assets from SARS scrutiny.

Retirement Annuities, Preservation Funds, And Pensions Abroad

Retirement assets are a major area of misunderstanding for South Africans living in Saudi Arabia.

Key considerations include:

• Whether contributions can continue
• How growth is taxed while resident or non-resident
• When withdrawals become taxable
• How residency status affects access
• How these assets interact with estate planning

Saudi does not tax pension income for expatriates. South Africa may, depending on residency and timing.

Ignoring retirement assets during a Saudi posting often limits flexibility later.

Exchange Control Logic Still Influences Outcomes

Although South Africa has modernised exchange control regulations, the underlying logic still influences how offshore arrangements are viewed.

Issues that may arise include:

• Whether assets were legitimately externalised
• Whether disclosures were made accurately
• Whether structures align with stated residency
• Whether capital flows are consistent with declared status

These issues rarely surface while income is flowing. They emerge when assets are accessed, transferred, or inherited.

Why South African–Saudi Issues Usually Surface Late

For many South African expats, Saudi Arabia feels like a financial pause button. Income arrives without local tax, offshore assets grow quietly, and day-to-day life feels simpler.

Problems rarely appear immediately.

They tend to surface:

• When formalising non-residency with SARS
• When accessing offshore investments
• When drawing retirement assets
• When returning to South Africa
• When an estate is administered

By then, assumptions made years earlier are tested against facts that can no longer be changed.

Hypothetical South Africa–Saudi Scenarios (Illustrative Only)

These scenarios are illustrative, not predictive. They reflect common patterns seen among South Africans in Saudi Arabia.

Scenario 1: The long-term contractor
A South African engineer works in Saudi for eight years and assumes tax residency ended on departure. Ordinary residence was never clearly severed. When offshore assets are accessed, SARS challenges the assumption.

Scenario 2: The delayed exit
A professional lives in Saudi for several years and only later attempts to formalise tax non-residency. Exit tax implications arise unexpectedly based on asset values at that point.

Scenario 3: The retirement asset surprise
A South African expat in Saudi ignores retirement annuities and preservation funds for years. When access is sought, residency status and tax treatment differ from expectations.

In each case, the issue is not Saudi law. It is how SARS interprets facts established earlier.

A South Africa–Specific Checklist (Awareness, Not Action)

This checklist is designed to prompt understanding rather than urgency.

Before or during a move to Saudi Arabia

• Are you still considered ordinarily resident in South Africa?
• If not, what evidence supports that position?
• Do you meet or fail the physical presence test?
• Has a formal change in tax residency been declared to SARS?
• Are you aware of potential exit tax implications?
• Which offshore assets remain reportable?
• How are foreign employment earnings treated?
• What retirement assets remain in South Africa?
• How will those assets be accessed in future?
• Does your estate planning reflect your current reality?

Most challenges arise because these questions were never asked, not because they were answered incorrectly.

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Why Saudi Postings Amplify South African Planning Risks

South Africa’s tax system places significant weight on:

• Residency
• Disclosure
• Long-term intention
• Alignment between structure and reality

Saudi Arabia removes local tax friction, which:

• Increases income certainty
• Delays engagement with SARS-related issues
• Allows assumptions to compound
• Makes eventual correction more complex

For South Africans, Saudi postings often require more clarity, not less.

How Professional Support Is Typically Structured For South Africans

For South Africans living in or moving to Saudi Arabia, professional support typically focuses on:

• Clarifying SARS residency status
• Managing or formalising tax exit
• Understanding exit tax exposure
• Aligning offshore assets with residency
• Reviewing retirement assets and access rules
• Coordinating tax, exchange control, and estate considerations

This is not about avoiding tax. It is about aligning position, structure, and reality.

Final Takeaway For South African Expats

Saudi Arabia does not tax employment income for expatriates.

That fact is powerful.
It does not override South Africa’s tax system.

For South Africans, outcomes depend on:

• Whether ordinary residence has genuinely ceased
• Whether physical presence thresholds are met
• Whether non-residency has been formalised
• How offshore assets and retirement funds are treated

Clarity early almost always delivers better outcomes than explanation later.