Recent proposals from the National Treasury suggest a major shift in how foreign pensions and retirement benefits are taxed in South Africa. Currently, under Section 10(1)(gC) of the Income Tax Act, lump sums, pensions and annuities from foreign sources tied to past employment are exempt from income tax for South African residents.
However, the 2025 Draft Taxation Laws Amendment Bill seeks to remove that exemption and bring these foreign retirement payouts into the tax net. The government argues that the current regime can lead to “double non-taxation,” especially in cases where treaties give South Africa taxing rights, but the exemption prevents collection.
If enacted, these changes would take effect from 1 March 2026. Many retirees who rely on foreign pensions may see their income eroded by local taxation, a dramatic departure from decades of practice. Critics warn that this reform could have unintended fallout: wealthy retirees may reconsider relocating to South Africa; current expatriates might repatriate or emigrate; and the country could lose a valuable source of consumer spending, property investment, and tax contributions. Furthermore, unlike local retirement funds, foreign pensions were never given South African tax deductions when contributions were made, so taxing withdrawals now may look inequitable.
For those impacted, early planning is now crucial. Should you require professional advice in this regard do not hesitate to contact our offices.
