The SARS Exit Tax and Deemed Disposal, Explained Without the Jargon
Your accountant phones in October, a few months after you’ve told SARS you’re ceasing tax residency and asks what your share portfolio was worth on a specific date last year. Not what you sold it for. What it was worth. You didn’t sell anything.
That call is most people’s first real encounter with the SARS exit tax and deemed disposal explained the way an accountant actually has to explain it — a notional sale, calculated in full, with no cash proceeds attached.
What actually gets “sold”
Section 9H of the Income Tax Act creates a deemed sale at market value on ceasing residency: for tax purposes only, you’re treated as having sold your worldwide assets the day before your South African tax residency ends. Nothing changes hands. There’s no buyer, no cash, no transaction. SARS calculates the gain as if there had been one and taxes it under capital gains rules in your final year as a resident.
That’s the part that catches people out: a tax bill generated by a sale that never happened, due in the same return where you’re also declaring the end of your residency.
How the number is worked out
For individuals, capital gains tax uses a 40% inclusion rate against your marginal income tax rate, which tops out at 45%. Multiply those and the maximum effective rate on the deemed gain comes out at roughly 18%. There’s also an annual exclusion — R40,000 as of the 2025 tax year, though the figure for 2026 wasn’t confirmed at the time this was written, so check the current amount with SARS or a tax practitioner before doing your own maths.
The gain itself is the difference between the market value of an asset the day before you cease residency and what you originally paid (or its base cost, if you’ve held it a long time). Whether that number is large or trivial depends entirely on what you hold and how long you’ve held it.
Why “exit tax” is a bit of a misnomer
Worth saying plainly: why exit tax is not a departure penalty comes down to timing and mechanism, not intent. It isn’t a fee SARS charges you at the border. It’s simply how South Africa closes out its tax claim on your worldwide assets at the point you stop being its tax resident. After that date, only income sourced in South Africa still falls inside SARS’s net — everything else becomes Canada’s concern, subject to the double taxation agreement between the two countries.
Worth flagging here: assets inside and outside SARS exit tax scope aren’t treated identically. One important carve-out — South African immovable property doesn’t get the deemed-disposal treatment. It stays inside the SA tax net regardless of your residency status and any eventual sale is taxed under the ordinary rules that apply to non-residents.
The part that trips people up procedurally
You declare your cessation date on the RAV01 form through SARS eFiling and SARS then opens a case asking for supporting paperwork: a signed declaration and motivation letter at minimum, your passport showing entry and exit stamps, plus whatever test-specific evidence applies to how you’re arguing residency ended. Get this wrong or miss documents and SARS can simply decline the declaration — leaving your tax residency status unresolved while you’re already living in Canada.
Because there’s no cash proceed from a sale that didn’t happen, the tax still has to be paid from somewhere else — savings, other income or sometimes by realising an actual asset specifically to cover it. That’s worth planning for well before the RAV01 goes in rather than after SARS calculates what you owe.
This is squarely a SARS-registered tax practitioner’s territory. Working it out from a blog post or a Facebook group thread is how people end up with the wrong number — get it run properly before you file.
Our free guides cover the practical side of moving money and settlement funds between South Africa and Canada — a useful starting point before your conversation with a tax practitioner.