South African Expat Tax Canada: What SA Expats Owe

If you are a South African living in Canada, SARS has not forgotten about you. South Africa taxes its residents on worldwide income, which means that if you are still a South African tax resident, SARS expects you to declare your Canadian salary, investments, and every other source of income on your annual tax return. It does not matter that you already pay tax to the Canada Revenue Agency (CRA). SARS still wants to know about it.

The good news is that South Africa and Canada have a Double Taxation Agreement (DTA) in place, and South African tax law includes exemptions and credits that can significantly reduce (or even eliminate) what you owe SARS. But you need to understand how these rules work, because getting them wrong can mean paying tax twice on the same income or getting into trouble with SARS for not filing.

This guide explains South African expat tax Canada rules in plain English. We cover whether you are still a SA tax resident, how the DTA works, how your Canadian salary is taxed, what happens with pensions and retirement funds, and the practical steps to stay compliant with both SARS and the CRA.

Are You Still a South African Tax Resident?

This is the first question you need to answer, because everything else depends on it. If you are a South African tax resident, SARS taxes you on your worldwide income (everything you earn anywhere in the world). If you are not a South African tax resident, SARS can only tax you on income that comes from South African sources (like rent from a property you still own in SA, or interest from a South African bank account).

South Africa uses two tests to decide if you are a tax resident. You only need to meet one of them to be classified as a resident.

The “Ordinarily Resident” Test

This test asks a simple question. Where is your real home? Not where you happen to be living right now, but where you would naturally return to if you had a choice. If you still think of South Africa as “home,” if you plan to go back one day, if your family ties and long-term intentions are still rooted in SA, then SARS may consider you ordinarily resident in South Africa, even if you have lived in Canada for years.

This is a judgment call based on the facts of your life. There is no fixed number of days or years that automatically makes you “not ordinarily resident.” It comes down to where your deepest ties are.

The Physical Presence Test

This test is based purely on how many days you have spent in South Africa. You are a tax resident under this test if you were physically present in SA for more than 91 days in the current tax year, more than 91 days in each of the five preceding tax years, and more than 915 days in total across those five preceding years. If you have been living in Canada full-time and only visit SA occasionally, you almost certainly do not meet this test.

Most South Africans in Canada are tax residents because of the ordinarily resident test, not the physical presence test. Simply living in Canada and getting Canadian permanent residency or citizenship does not automatically end your South African tax residency. You have to take active steps to end it.

For the full breakdown of how these tests work, see the guide to the South African tax residency test. If you want to formally end your SA tax residency, that is a separate process explained in the cease tax residency guide.

What Happens If You Are a Tax Resident of Both Countries?

This is extremely common for South Africans in Canada, and it is the core of the South African expat tax Canada problem. Canada considers you a Canadian tax resident if you have significant residential ties there (a home, a spouse or dependants living with you, or social and economic ties). South Africa may still consider you a South African tax resident under the ordinarily resident test. So you end up being a tax resident of both countries at the same time.

When this happens, you are technically required to declare your worldwide income in both countries. That sounds like you would pay tax twice on the same money, but that is where the Double Taxation Agreement between South Africa and Canada comes in.

The South Africa-Canada Double Taxation Agreement Explained

The DTA is the most important piece of the South African expat tax Canada puzzle. South Africa and Canada signed a Double Taxation Agreement in 1995 (it came into effect in 1997). The purpose of this agreement is to make sure that when you earn income, only one country gets to tax it, or if both countries tax it, you get a credit so you do not pay double.

The DTA does two important things for South Africans in Canada.

The Tie-Breaker Rules

If you are a tax resident of both South Africa and Canada, the DTA has a set of tie-breaker rules (Article 4) that decide which country you are a resident of for treaty purposes. The tie-breakers work in a specific order. You go through them one by one until one of them gives a clear answer.

For most South Africans who have been living in Canada for several years, have a home there, work there, and have their family there, the tie-breaker will resolve in Canada’s favour. This means that for treaty purposes, you are treated as a Canadian resident and a South African non-resident. This is significant because it changes what SARS can tax you on.

But here is the critical point that many expats miss. The DTA tie-breaker does not automatically change your status with SARS. You need to actively use the DTA by declaring it on your South African tax return or by formally ceasing your tax residency with SARS. If you just stop filing returns and assume the DTA protects you, SARS will still treat you as a resident and may come after you for unpaid taxes.

For more on how DTAs work across all countries, see the full guide to SARS Double Taxation Agreements.

Taxing Rights on Different Types of Income

The DTA also sets out rules for which country gets to tax which type of income. This is not the same for every type of income. Here is a summary of the key rules that affect South African expats in Canada.

How Your Canadian Salary Is Taxed: South African Expat Tax Canada Rules

If you are still a South African tax resident and you work in Canada, here is how the tax on your salary works.

Step one. Canada taxes your salary under Canadian domestic law. You file a T1 return with the CRA and pay Canadian income tax. This is straightforward and it happens regardless of your South African status.

Step two. South Africa also wants to tax your worldwide income, including your Canadian salary. But before calculating your SA tax bill, two important reliefs can reduce or eliminate it.

The R1.25 Million Foreign Income Exemption

South African tax law has a provision (Section 10(1)(o)(ii) of the Income Tax Act) that says the first R1.25 million of your foreign employment income can be exempt from South African tax. That means SARS does not tax it at all. But you have to meet specific requirements to qualify.

You must be working as an employee (not self-employed or a freelancer). You must have spent more than 183 full days outside South Africa in any 12-month period. And within that same period, at least 60 of those days must have been continuous (one unbroken stretch of 60+ days outside SA). If you live and work in Canada full-time, you will almost certainly meet these requirements.

For the full details of how this exemption works, including worked examples and the apportionment formula, see the guide to the R1.25 million foreign income exemption. For a detailed breakdown of the days tests, see the 183 day rule guide.

The Foreign Tax Credit

If your Canadian salary exceeds R1.25 million (or if part of it does not qualify for the exemption), the excess is taxable in South Africa. But you do not pay tax twice on it. South African law (Section 6quat of the Income Tax Act) allows you to claim a foreign tax credit. This means the tax you already paid in Canada on that same income gets subtracted from your South African tax bill.

In practice, because Canadian tax rates are generally similar to or higher than South African tax rates, the foreign tax credit usually wipes out your remaining SA tax liability on employment income completely. You end up owing SARS nothing, or very close to nothing, on your Canadian salary.

South African Expat Tax Canada: Pensions and Retirement Funds

Pensions are where the SA-Canada DTA gets more complicated than other country guides, because both countries are allowed to tax pensions under Article 18 of the treaty.

Your South African Pension, Provident, or RA While Living in Canada

If you have a pension fund, provident fund, or retirement annuity (RA) in South Africa and you withdraw from it or start receiving payments while living in Canada, here is what happens.

South Africa will tax the withdrawal or payment according to SA tax law. The tax treatment depends on whether it is a lump sum withdrawal or an annuity, and which retirement fund it comes from. For lump sum withdrawals, SA applies a special tax table (not your normal marginal rate). For regular annuity payments, SA taxes them as income.

Canada will also want to tax the pension income, because under Canadian tax law you are required to declare your worldwide income (including foreign pension payments) on your T1 return.

To avoid paying double, the DTA allows both countries to tax pensions, but the country where you live (Canada) must give you a credit for the tax already paid in the country where the pension comes from (South Africa). In practice, this means you declare the SA pension income on your Canadian return, calculate the Canadian tax on it, and then subtract the South African tax you already paid as a foreign tax credit.

For a detailed guide on withdrawing from SA retirement funds while abroad, see the retirement fund withdrawal overseas guide.

Your Canadian Pension While Potentially Owing SA Tax

If you contribute to a Canadian pension plan (like an employer pension, an RRSP, or the Canada Pension Plan) and you are still a South African tax resident, the contributions and growth in those Canadian plans may need to be considered on your SA tax return. However, the DTA includes a helpful provision (Article 27(3)) that says contributions to a Canadian pension plan can be treated in SA the same way as contributions to a SA pension plan, for up to 60 months, as long as you were contributing to the Canadian plan before arriving in (or returning to) South Africa.

The more common scenario for South Africans who have moved to Canada permanently is that they have SA retirement funds they want to access or transfer. The rules around this are complex, especially after the two-pot retirement system was introduced in September 2024. A tax practitioner who understands both SA and Canadian tax law is strongly recommended for pension planning.

Canadian Social Security Pensions (CPP/OAS)

Under the DTA, pensions arising in a Contracting State (Canada) and paid to a resident of the other Contracting State (South Africa, if you return) may be taxed in both countries. The country where you live gives a credit for the tax paid in the other country. If you are living in Canada and receiving CPP or OAS, this is straightforward because Canada is both the source and your country of residence. It only becomes relevant if you move back to South Africa and start receiving CPP/OAS from abroad.

South African Expat Tax Canada: Capital Gains and Investments

If you have investments in both countries, the rules differ depending on what type of asset you are selling.

South African property. If you sell immovable property in South Africa, SARS can tax the capital gain regardless of where you live. This is true whether you are a SA resident or non-resident. Canada will also want to tax it if you are a Canadian resident (because Canada taxes worldwide income), but Canada must give you a credit for the SA tax paid.

Canadian investments. If you are a Canadian resident and sell shares, ETFs, or other investments in Canada, only Canada taxes the gain. South Africa can also tax it if you are still a SA tax resident, but the foreign tax credit applies.

Shares in SA companies. If you sell shares in a South African company while living in Canada, the DTA generally gives taxing rights to the country where you are a resident (Canada), unless the shares derive their value mainly from SA immovable property.

If you are thinking about ceasing your SA tax residency, be aware that this triggers a deemed disposal of your worldwide assets for SA capital gains tax purposes. This is sometimes called the “exit tax.” You need to plan carefully before making this move.

Do You Still Need to File Tax Returns in South Africa?

This is one of the most frequently asked South African expat tax Canada questions, and the answer depends on your residency status.

If you are a South African tax resident, yes. You must file an ITR12 return with SARS every year, declaring your worldwide income (including your Canadian salary). You then claim the R1.25 million exemption and the foreign tax credit to reduce your SA tax liability. Even if you end up owing SARS nothing, you still have to file the return.

If you are a non-resident (either because you formally ceased your SA tax residency or because the DTA tie-breaker deems you exclusively a Canadian resident), you only need to file a SA tax return if you have South African-sourced income. That includes things like rental income from SA property, interest from SA bank accounts above the exempt threshold, or capital gains from selling SA property.

If you have not been filing returns and you should have been, read the guide to the SARS Voluntary Disclosure Programme before doing anything else. Coming forward through the VDP can save you significant penalties.

Common South African Expat Tax Canada Mistakes

Assuming Canadian Residency Ends SA Tax Residency

Getting Canadian permanent residency or Canadian citizenship does not end your South African tax residency. These are completely separate systems. You can be a tax resident of both countries at the same time. To stop being a SA tax resident, you either need to formally cease your tax residency with SARS or rely on the DTA tie-breaker (but you still need to declare this on your SA return).

Not Filing SA Returns Because “I Pay Tax in Canada”

Paying tax in Canada does not replace filing a return with SARS. If you are a SA tax resident, you are legally required to file a return in South Africa, even if your final SA tax bill is zero after applying the exemption and foreign tax credit. SARS does not know you paid tax in Canada unless you tell them by filing the return and claiming the credit.

Not Claiming the Foreign Tax Credit

Some expats file their SA returns but forget to claim the Section 6quat foreign tax credit for the Canadian tax they paid. This means they end up with a SA tax bill they should not have. Always claim the credit. You need to provide SARS with evidence of the Canadian tax paid (your Notice of Assessment from the CRA is the standard proof).

Ignoring SA Investments and Property

Even if you have sorted out your employment income, do not forget about SA-sourced income like rental income from property, interest from SA bank accounts, or dividends from SA investments. These need to be declared on both your SA and Canadian returns, and the DTA rules on each type determine where the primary taxing right sits.

Practical Steps to Stay Compliant as a South African Expat in Canada

Determine your tax residency status. Work out whether you are a SA tax resident, a Canadian tax resident, or both. If both, check how the DTA tie-breaker applies to your situation. The tax residency test guide will help.

File returns in both countries. If you are a tax resident of both South Africa and Canada, you need to file a T1 return in Canada and an ITR12 return in South Africa. On your SA return, declare your worldwide income, claim the R1.25 million exemption, and claim the Section 6quat foreign tax credit for Canadian taxes paid.

Keep your documents. Hold onto your Canadian T4 slips (employment income), your Notice of Assessment from the CRA, records of any SA-sourced income, and your travel records showing days spent in and out of South Africa.

Consider ceasing SA tax residency. If you have permanently settled in Canada, have no intention of returning to SA, and want to simplify your tax life, you may want to formally cease your South African tax residency. This is a big step with significant consequences (including the exit tax), so get professional advice before doing it.

Get professional help for pensions. If you have SA retirement funds and want to withdraw, transfer, or otherwise deal with them from Canada, the interaction between SA tax law, Canadian tax law, and the DTA is complex. This is not a DIY job. Use a tax practitioner who understands both systems.

For the full picture on all your South African expat tax obligations, see the complete guide to South African expat tax. If you are still in the process of leaving South Africa, the leaving South Africa tax guide covers everything you need to do before you go.