The South African Revenue Service (SARS) and National Treasury have published draft legislation aimed at changing tax rules for foreign retirement funds.
Image: IOL/Ron Ai
The South African Revenue Service (SARS) and National Treasury have published draft legislation aimed at changing tax rules for foreign retirement funds.
According to Tax Consulting SA, if passed, the amendment would repeal the existing exemption, which has been in effect since March 1, 2017, and is expected to take effect from March 1, 2026.
This change would allow SARS to tax retirement lump sums, pensions, and annuities received from foreign sources by South African tax residents.
Currently, South Africans don’t pay tax on foreign retirement funds to avoid being taxed twice.
However, Treasury has insisted this rule allows some retirement money to slip through untaxed, costing the government revenue.
The proposed amendment would repeal the existing exemption in section 10(1)(gC)(ii) of the Income Tax Act, effectively bringing foreign retirement benefits into South Africa.
Treasury has previously said that "the exemption may result in double non-taxation, particularly where the foreign jurisdiction does not tax the retirement income due to domestic law or tax treaty limitations."
"In these cases, neither South Africa nor the foreign jurisdiction imposes tax on the retirement benefit. This undermines South Africa’s residence-based system of taxation and leads to revenue forgone to the fiscus."
Treasury has also previously warned that by maintaining the exemption, South Africa sometimes loses its exclusive right to tax foreign retirement benefits under double taxation agreements.
Tax Consulting South Africa has also urged South African expatriates and foreigners relocating to South Africa to seek advice from qualified tax professionals experienced in cross-border taxation.
"As retirement planning is a key principle of personal financial planning, South African expatriates and foreigners relocating to South Africa should consult qualified tax professionals experienced in cross-border taxation.
"With the legislative cycle progressing, it will also be a make-or-break for taxpayers to stay up to date on any changes that will affect their foreign retirement income and plan accordingly on a more urgent basis than they may have liked."
The deadline to submit comments on the proposed amendments is September 12, 2025. Comments must be sent to: