US expat tax filing

US expat tax filing

US expat tax filing, in partnership with TFX. Written by Veronica Rhodes.

South Africa has recently enjoyed a reputation for diversity, prosperity, and stability in the continent. The country is often called the rainbow nation, and its multiethnic society encompasses many religions, languages, and cultures. It is also home to ten UNESCO World Heritage Sites, the most in Africa.

South Africa is also the continent’s third-largest economy and has been classified as a newly industrialized country. Thanks to its booming economy, the country has emerged as one of the best places in Africa for business and commerce. 

It’s easy to see why South Africa has become a top destination for American expats. But just because you are based abroad does not mean you are free from your U.S. tax obligations. Here is an expat tax guide for Americans living in South Africa.

US expat tax

According to the U.S. federal tax code, U.S. citizens and permanent residents (also known as Green Card holders) are required to file a tax return, even if they live and work overseas. That means you may need to pay tax on income over $12,400 (or $400 if you’re self-employed).

Americans abroad are automatically granted a filing extension until June 15, and you can request a second extension until October 15.

Reporting requirements for foreign assets

Certain American taxpayers with foreign financial assets are required to file an annual Foreign Account Tax Compliance Act (FATCA) report.

If you own overseas assets (e.g. pensions, hedge funds, and stock holdings) with a collective value of $200,000, you need to declare them using Form 8938, Statement of Specified Foreign Financial Assets. Your foreign residence is exempt from FATCA reporting requirements.

Foreign financial accounts (e.g. bank accounts and brokerage accounts) worth $10,000 and above must also be reported to the IRS by filing a Report of Foreign Bank and Financial Accounts (FBAR).

South African expat tax

Taxation in South Africa is based on your residency status. Tax residents are taxed on their worldwide income while non-residents are only taxed on their local income.

Tax residency in South Africa

American expats qualify as tax residents of South Africa:

  • if they are considered ordinarily resident in South Africa (i.e. South Africa is their principal home), or
  • if they are physically present in South Africa for more than 91 days in the tax year and each of the preceding five tax years, and also for more than 915 days, in aggregate, in the preceding five tax years (also known as the physical presence test).

Personal income tax rate in South Africa

South Africa’s progressive tax rate is based on income, with tax brackets ranging from 18% to 45%. Here are the tax rates for tax year 2021.

Taxable income (R)Tax rate (R)
1 – 205,90018% of taxable income
205,901 – 321,60037,062 + 26% of taxable income above 205,900
321,601 – 445,10067,144 + 31% of taxable income above 321,600
445,101 – 584,200105,429 + 36% of taxable income above 445,100
584,201 – 744,800155,505 + 39% of taxable income above 584,200
744,801 – 1,577,300218,139 + 41% of taxable income above 744,800
1,577,301 and above559,464 + 45% of taxable income above 1,577,300

South African tax season

Unlike the U.S. tax year, which follows the calendar year (January 1 to December 31), the South African tax year runs from March 1 to February 28 or 29 of the following year. 

Expat taxpayers can file their South African tax returns between July 1 and November 23. The deadline is the same whether you are filing electronically or by paper.

See these posts to help you with your South African tax filing:

Expat tax exemptions in South Africa

American expats who have paid income tax to the South African government can take advantage of several tax benefits and exemptions to reduce their U.S. tax liability on the same income.

You may invoke the Foreign Earned Income Exclusion to exclude up to $108,700 (for tax year 2021) of foreign-earned income from U.S. federal tax.

You can also take a Foreign Tax Credit for South African income taxes imposed on the same income. Expat taxpayers can claim an equivalent value in tax credit for every dollar of income tax paid to the South African Revenue Service.

US – South Africa tax treaty

The U.S.-South Africa tax treaty allows for improved tax transparency and information sharing between the two countries. The tax treaty prevents double taxation for dual citizens and is also used to resolve possible tax issues.

How to file expat taxes in South Africa

It is important to fill out your federal tax returns as accurately as possible. However, your tax situation can be complicated if you live in South Africa, and you may incur heavy fines if you accidentally omit information on your return or miss an important deadline. 

If you are unsure about your taxes as an American expat in South Africa, your best option is to contact a tax expert.

For 25 years, TFX has helped Americans living abroad with their tax needs, including preparing their U.S. tax returns. Our team of tax experts can help you file your tax returns in record time. They can also help with any questions you may have about US expat tax filing.

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