Where a person ceases to be a tax resident in South Africa during any year of assessment, that person must be deemed to have disposed of all their assets at market value on the day before their residency is ceased. Inevitably, this deemed disposal triggers a capital gains tax consequence for those persons, irrespective of whether the assets have actually been disposed of – which could result in a significant cash outlay, given that there are no cash proceeds when the deemed disposal occurs, as opposed to an actual disposal. This tax charge is colloquially referred to as the “exit charge”.
There are, however, specific assets that are excluded from the exit charge. Assets that are generally excluded from this deemed disposal include (amongst others) cash and South African immovable property. Typically, the assets that are most frequently subject to the exit charge involve shares (of whatever nature) held in any company.