Foreign Pensions

By Meerkat Accountants, Plettenberg Bay

Many South Africans have worked or lived abroad at some point in their careers, and continue to receive pensions or lump-sum benefits from foreign funds. Up to now, those foreign pensions have often enjoyed favourable tax treatment in South Africa — but that may be about to change.

⚖️ The Key Change

The Taxation Laws Amendment Bill, 2025 (TLAB 2025) proposes to remove the long-standing exemption under section 10(1)(gC)(ii) of the Income Tax Act. This section currently exempts certain foreign pensions, annuities, or lump sums from South African income tax, provided they relate to past employment outside South Africa.

If the proposal becomes law, from 1 March 2026, these pensions and lump sums will become fully taxable in South Africa — even if they arise from services rendered abroad.

💬 Why the Change?

National Treasury argues that the exemption has led to unequal treatment between domestic and foreign retirement funds. In other words, South African retirement fund income is taxable, while certain foreign benefits have not been — something the Treasury now wants to align.

🌍 Who Will Be Affected?

– South African tax residents who receive pensions or lump sums from foreign funds or employers.
– Retirees returning to South Africa who still draw income from UK, Australian, or Canadian retirement schemes.
– South Africans who spent years working abroad but never emigrated for tax purposes.

If you are a non-resident for South African tax purposes, the change does not apply — your foreign pension remains outside South Africa’s tax net.

🧮 What Will Happen Practically?

Once the exemption is removed:
– The foreign pension or annuity will form part of your gross income.
– It will be taxed at your marginal rate, like local pension income.
– If foreign tax was paid, you may still claim a foreign tax credit under section 6quat, subject to limits.
– Double Taxation Agreements (DTAs) will remain relevant — some may still assign taxing rights exclusively to the source country.

⏳ Timing and Next Steps

The change is still a proposal, not yet law. However, it’s scheduled to take effect from 1 March 2026. For anyone expecting or already receiving a foreign pension, now is the time to:
– Review the structure of your retirement income,
– Check your residency status, and
– Seek professional advice on tax exposure and possible planning options.

🐾 How Meerkat Accountants Can Help

At Meerkat Accountants, we help clients understand how local and international tax changes affect them — from pension income to investment portfolios. If you or your clients receive a pension from abroad, we can assist in assessing the likely impact of this change and planning accordingly.

📩 Contact us: info@meerkataccountants.co.za
🌐 Visit: www.meerkataccountants.co.za