This is one of the most common questions asked by South Africans living and working in the UK:
“I’ve already paid tax in the UK – so why is SARS still asking me to declare and possibly pay tax in South Africa too?”
It’s a fair question, and one rooted in the complex world of cross-border tax, residency rules, and the Double Tax Agreement (DTA) between South Africa and the United Kingdom.
Let’s break it down in a simple, practical way.
1. The Starting Point: South African Tax Residency
Whether or not SARS can tax you depends first and foremost on whether you are still considered a South African tax resident.
- If you haven’t formally broken your tax residency (either through the domestic tests or via the DTA), then SARS considers you a tax resident.
- As a resident, South Africa taxes you on your worldwide income, regardless of where you live or earn.
So, even if you’re working in the UK and paying tax there, SARS still expects you to declare your UK income.
2. Double Tax Agreement Explained: Does It Stop SARS Taxing You?
Not automatically.
The South Africa–UK Double Tax Agreement is designed to prevent double taxation, not to eliminate taxation entirely. It ensures that you’re not taxed twice on the same income, but it doesn’t say you’ll only ever be taxed in one country.
To claim DTA protection, you need to show either:
- That you’re non-resident under the DTA (via tie-breaker tests); or
- The UK has primary taxing rights to your income based on where it arose.
Unless that is clearly established, SARS maintains its taxing rights as long as you’re a resident.
3. If I Already Paid UK Tax, Why More in SA?
Here’s how it works in practice:
If the UK has primary taxing rights (for example, because you earned the income from employment physically performed in the UK), and you are still a South African tax resident, then you may claim a foreign tax credit in South Africa under Section 6quat of the Income Tax Act.
However:
- You must still declare the income in South Africa.
- SARS will allow a credit only up to the amount of UK tax actually paid.
- If the South African tax liability exceeds the UK tax paid, you will need to pay the difference to SARS.
- This credit mechanism is designed to prevent double taxation, not to exempt the income entirely from tax in South Africa.
You are, in effect, taxed at the higher of the two countries’ tax rates, but not twice on the same income.
4. What If I Break Tax Residency?
If you’ve formally ceased to be a South African tax resident, either through:
- Domestic tests (intention and ordinary residence); or
- Article 4 of the DTA (tie-breaker rules),
Then your worldwide income is no longer taxable in South Africa, and you no longer need to declare UK income.
However, breaking residency comes with serious implications:
- You’ll trigger an exit tax on your worldwide assets (Section 9H of the Income Tax Act).
- You’ll need to inform SARS and provide documentation proving your new status.
- If you return to SA later, your assets will be re-entered at market value, and future gains will be taxed from that point forward.
5. Still a Resident? You Must File & Declare
If you haven’t broken residency, you’re still required to file a tax return in SA and:
- Declare your UK income.
- Claim the correct foreign tax credit; and
- Pay any top-up if SA tax is higher.
Failure to do so could result in non-compliance penalties, interest, and potentially a SARS audit.
Final Thoughts
Just because you’re paying tax in the UK doesn’t automatically exempt you from your South African tax obligations. It all depends on:
- Your residency status in SA;
- The source of your income, and
- How the DTA allocates taxing rights.
If you’re unsure whether you’re still a South African tax resident, or how to correctly claim tax credits, it’s essential to get specialist advice. Getting this wrong can be costly.