South Africans Living Abroad – Is Your Company a CFC?
If you’re a South African living abroad and own a foreign company, you may still be subject to South African tax laws, specifically the Controlled Foreign Company (CFC) rules – unless you’ve formally ended your SA tax residency with SARS. As a tax resident, you’re required to report your worldwide income, including income from foreign companies.
When CFC Rules Don’t Apply:
CFC rules under Section 9D of the Income Tax Act don’t apply if:
- The foreign income is taxed at least 67.5% of SA tax rates.
- The income is already taxed in SA.
- The company operates as a Foreign Business Establishment (FBE) with real, independent business operations abroad (fixed location, staff, infrastructure).
- You hold less than 10% of the company’s participation or voting rights.
When CFC Rules Apply:
A foreign company is a CFC if:
- SA residents hold more than 50% of participation or voting rights; or
- The company’s financials are consolidated into those of an SA company under IFRS 10.
What It Means:
If your company qualifies as a CFC and no exemption applies:
- You must include your share of its income in your SA tax return.
- You must file an IT10B form, even if exempt.
- You may pay more tax in SA than was paid abroad.
Due to the complexity of CFC rules, it’s strongly advised to seek professional tax advice to ensure compliance and avoid costly errors.