Global Mobility Tax

South Africa |Taxation of foreign pensions

Summary

Under current legislation, the Income Tax Act provides for an exemption of foreign pensions (with specific exceptions) received by or accrued to resident taxpayers. The Taxation Laws Amendment Bill 2025 proposes the removal of this exemption which result in foreign pensions received by tax residents being taxable.

The detail

Current tax treatment

Section 10(1)(gC)(ii) of the Income Tax Act currently exempts certain foreign-sourced lump sums, pensions or annuities (i.e. foreign retirement benefits) received by or accruing to South African tax residents as consideration received for past employment outside of South Africa.

The main purpose of the exemption is to avoid double taxation (or excessive taxation) on foreign pension amounts received by South African tax residents. Although the exemption is not unconditional, it essentially exempts many foreign pensions/retirement benefits earned through foreign employment and/or services rendered abroad.

Proposed amendments

In the draft Taxation Laws Amendment Bill and its explanatory memorandum, it is currently proposed that this exemption be deleted from the Income Tax Act with effect from 1 March 2026.

Although the taxable treatment of foreign pensions will still be subject to applicable Double Taxation Agreements (DTA’s), for example if a tax treaty gives exclusive tax rights to the foreign source country, this proposed change will have a significant impact on South African tax residents who have historically been or are currently working abroad as an expatriate.

The deletion of this exemption could potentially:

• Result in the double taxation of foreign pensions depending on the rules provided under the applicable country’s DTA.
• Create an increased tax burden for a significant amount of returning expatriates or foreign nationals who have become tax residents from an income tax perspective in South Africa.
• Result in increased complexity, compliance costs and administrative burden for taxpayers including the maintenance of accurate record keeping and professional advice being required.

Although this is only a proposed amendment at this stage, it will be essential:

• For South African taxpayers with foreign pensions to keep abreast of the final form of the Taxation Laws Amendment Bill 2025 when promulgated into effect.
• Seek professional tax advice especially for those with complex foreign retirement income or multiple foreign pension sources.

This will allow taxpayers to plan ahead and take the necessary actions ahead of 1 March 2026 should the amendment come into effect.

Contact us

For a deeper discussion on the above, please reach out to your Vialto Partners point of contact, or alternatively:

Kesiree Mari
Director – South Africa

Craig Willson
Manager – South Africa

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