By Kim Doolan*
In the ever-evolving landscape of personal finance, few developments carry as much significance as the recent proposal in the 2025 Draft Taxation Administration Laws Amendment Bill (2025 draft TALAB), which has put the spotlight on foreign pensions.
This proposed change has the potential to redefine financial planning for internationally mobile professionals, returning expatriates, and retirees choosing South Africa as their home.
If enacted, it will take effect from 1 March 2026, giving taxpayers a narrow window to prepare.
2025 draft TALAB proposal
The 2025 Draft TALAB proposes the removal of the foreign pension exemption, so that all foreign retirement benefits received by South African residents will be taxed in line with South Africa’s residence-based tax system, subject to applicable double taxation agreements (DTAs).
Historically, South Africa has provided an exemption under Section 10(1)(gC)(ii) of the Income Tax Act. Subject to certain conditions, this section exempted foreign pensions, lump sums, and annuities received by South African tax residents from a foreign source, provided they were paid as consideration for past services rendered outside South Africa.
National Treasury has highlighted two key issues with the current exemption. First, it 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. Second, in instances where a double taxation agreement grants South Africa the exclusive right to tax such retirement benefits based on residence, maintaining the exemption effectively forfeits this right.
Nevertheless, the general sentiment remains that South Africa risks losing its edge as a magnet for returning expatriates, foreign retirees, and skilled professionals. Comparatively, jurisdictions such as Mauritius continue to attract talent with tax-friendly incentives. South Africa’s move in the opposite direction could deter valuable capital and skills.
Planning ahead: Steps to consider before March 2026
With just months before these changes could take effect, taxpayers with foreign retirement benefits should act now and consult cross-border tax experts:
- Review your tax residency status – Your residency determines how South Africa taxes your worldwide income, including foreign pensions.
- Review DTA coverage – Understand which treaties apply to your pension income and how taxing rights are determined.
- Model your tax exposure – Quantify the potential South African tax liability if the exemption is removed.
- Consider restructuring – Explore whether there are any steps that can optimise outcomes before the exemption is removed.
Closing thoughts
The proposed removal of the foreign pension exemption marks a turning point in how South Africa treats offshore retirement income. While Treasury frames the change as closing a loophole, its impact will be felt by returning expatriates and retirees.
The rules are complex, and proactive planning can prevent costly mistakes. Early engagement with qualified advisors and a careful review of relevant tax treaties can make the difference between an avoidable tax shock and a smooth transition.
*Kim Doolan is a tax practitioner at Brenthurst Wealth and is based in Paarl.
I obtained my National Diploma in Financial Information Systems from the Cape Peninsula University of Technology in 1999 and have worked in the wealth management industry since January 2000. Over the years, I have gained extensive experience in various roles, including Portfolio Manager Assistant, Planner Assistant, and Paraplanner.
Esmarelda Isaacs-Andreas joined the Brenthurst Wealth Stellenbosch office in October 2025, taking on the dual role of Receptionist and Fiduciary Administrator.
Angelique Anderson joins our Pretoria office as an Administrative Assistant, bringing over 24 years of experience across the financial, legal, and executive support sectors, both locally and internationally. Her meticulous attention to detail, discretion, and extensive knowledge of asset finance and compliance make her an invaluable addition to our team.
Ashley joined Brenthurst Wealth in January 2025 as Office Administrative Assistant and Receptionist for the Stellenbosch Office.
Michelle joined the Brenthurst Wealth Team in 2025 as a paraplanner assisting Iniel Van Zyl and Leslie Greyling in our Fourways office.
René Heystek joined Brenthurst Wealth in November 2023, as receptionist and administrative assistant in the newly established George/Garden Route office.
Michelle Heystek has built a career in the financial services over the last two decades, after obtaining her B.Com degree in Financial Management in 2005. Once she joined Brenthurst in 2006, she continued her academic journey, obtaining her Certificate in Wealth Management from INSETA in 2007, followed by a Postgraduate Diploma in Financial Planning from the University of the Free State. In 2008, she earned the Certified Financial Planner (CFP®) designation.
Anelle joined Brenthurst Wealth as a Receptionist and Administrative Assistant to Brian Butchart in the Cape Town office in December 2023. She has a wealth of knowledge from working as a liaison between Financial Advisers and clients at TMA and Absa Investment Management Services (Aims) since 1998. She obtained her B. com degree from the University of Port Elizabeth in 1997.
Sanet was appointed in April 2020, joining our Cape Town team as an Executive Administration Assistant to Renee Eagar. She has been in the financial services industry since 1990. Her previous experience includes positions at Sanlam, BJM and ABSA. She spent her last 12 years working at Alexander Forbes Private Client Wealth as a Senior Wealth Management Assistant. She has received numerous accolades over the years which include but not limited to, Alexander Forbes Client Service Excellence – Silver award in 2014,2015 and 2017. Sanet has also obtained her Certificate in Wealth Management (NQF 5) in 2012 and achieved “Best Student of the Year” from Moonstone.
Maria Smit is a Certified Financial Planner® with over 10 years of experience in the financial planning industry.
