This was the central message by stakeholders during public hearings before the Standing Committee on Finance on the draft 2025 Taxation Laws Amendment Bill (TLAB) and Tax Administration Laws Amendment Bill (TALAB) on 21 and 22 October 2025.
If enacted, the proposed amendment would come into effect on 1 March 2026, giving the South African Revenue Service (SARS) taxing rights over foreign retirement funds of South Africans who have worked abroad and accumulated foreign retirement savings, or foreign nationals who become South African tax residents.
Unintended Consequences: International Retirees and Capital Could Exit
John-Paul Fraser, Team Lead: Cross-Border Taxation at Tax Consulting South Africa, told the committee that in daily practice they see a growing number of enquiries from concerned expats who are reconsidering their planned return to South Africa, as well as foreigners who ask whether Mauritius would not be a better retirement choice.
This aligns with concerns expressed in September 2025 during virtual workshops by National Treasury and SARS as part of the legislative process to approve the amendments. During these session advisors mentioned clients saying that if they have to move to protect their foreign pensions, they will do that, opting for lower tax rate jurisdictions.
Besides what foreign retirees contribute to the economy in terms of housing, healthcare, education and investment when remitting foreign pensions into South Africa, many friends and family members from overseas frequently visit during the year, spending huge amounts on local hospitality, accommodation, and transport. South Africa will miss out on this if foreign retirees leave due to the removal of tax-exempt benefits.
Longstanding Tax Planning at Risk
Effective from 1 March 2017, section 10(1)(gC)(ii) of the Income Tax Act, No. 58 of 1962, subject to certain requirements, exempts from normal tax any lump sum, pension or annuity received by or accrued to any South African tax resident from a source outside South Africa as consideration for foreign services rendered in terms of past employment.
As South African tax residents are generally required to declare and pay taxes on their worldwide income, this section in the Act was designed to prevent double taxation on retirement funds already taxed in a foreign country or earned while an individual was not subject to South African tax.
According to Fraser scrapping the exemption amounts to economic retrospectivity. Many individuals who are nearing retirement, have structured their financial futures around it and repealing it now would, in effect, change the rules midstream. They would unexpectedly go from zero tax to full tax, potentially leaving retirees financially exposed in their later years.
ASISA echoed this concern, further warning that affected retirees could find themselves in a “financially precarious position” while being unable to supplement their income due to visa restrictions that prevent them from working in South Africa.
Questions on Economic Impact and Lack of Data
According to ASISA’s presentation, its members question whether the proposal will have economic benefits for South Africa that outweigh the current loss in revenue due to the tax-exemption currently in place.
Retirees and expatriates contribute to the domestic economy through spending, investment, and paying VAT on goods and services – all of which could decline if they leave or choose not to return.
Fraser went on to say if enacted, removing the exemption risks discouraging skilled foreign nationals and investors from retiring in South Africa, undermining other government objectives to attract foreign skills and capital.
He noted that no data was provided by National Treasury or SARS on how many taxpayers currently claim the exemption. Without this data, the potential revenue gain from repealing the exemption cannot be accurately assessed.
Policy Alternatives Proposed
While stakeholders supported the goal of the proposed amendment to prevent double non-taxation, they argued that a blanket repeal is disproportionate.
ASISA urged the committee to retain the current exemption, or at a minimum, opting for two partial exemptions:
Fraser added alternative solutions to consider include:
The proposed repeal of the foreign pension exemption under the 2025 Taxation Laws Amendment Bill represents a pivotal moment for South Africa’s tax policy. While aimed at curbing double non-taxation, the measure risks unintended consequences that need to be founded on proper information and impact investigation.
The next step of the legislative process is for Parliament to provide its feedback and comments on the submissions from stakeholders who took part in the Public Hearings.
