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      South Africa's National Treasury has withdrawn its recent proposal to change how certain foreign retirement benefits are treated by removing the tax exemption under section 10(1)(gC)(ii) of the Income Tax Act. This means that qualifying foreign pensions, annuities, and lump sums received by South African residents will continue to be exempt from South African normal (or income) tax, pending any future legislative changes.1

      Also, see GMS Flash Alert 2025-169, 19 September 2025, for information on the now-withdrawn proposal.2

      WHY THIS MATTERS

      Section 10(1)(gC)(ii) directly affects the financial well-being of South African tax residents who receive foreign pensions, annuities, or lump sums for past services rendered outside the country.

      Key reasons why this is noteworthy for globally mobile employees:

      • Financial Stability: With the proposed amendment withdrawn, individuals in this category have immediate clarity and can continue to receive their foreign retirement income without facing unexpected South African tax obligations.
      • Avoidance of Double Taxation: The exemption was originally introduced to prevent the same income from being taxed both in South Africa and in the country where the retirement benefit originated. Maintaining the exemption continues to protect against this risk.
      • Effect on Returning Residents: Many South Africans who spent part of their careers abroad and have since returned rely on these foreign retirement benefits as a main source of income. Losing the exemption would have had a considerable negative effect on their disposable income and overall standard of living.
      • Ongoing Vigilance Required: Although the immediate concern has been addressed, the National Treasury has indicated that the matter may be revisited in the future. Those affected should remain alert to any further legislative changes and may need to review their financial strategies or seek professional tax guidance as circumstances evolve.

      Key Highlights

      • At present, South African residents who receive qualifying foreign-sourced pensions, annuities, and lump sums for past foreign employment continue to benefit from an exemption from South African normal tax. However, this exemption is under review, and future changes may be introduced following further consultations by National Treasury.
      • In the draft response to the 2025 Taxation Laws Amendment Bill, National Treasury has said it is still concerned that South Africa may be missing out on tax from foreign pensions, and that the current rules could lead to some people not paying tax on these pensions anywhere in the world. Treasury recognises the need to protect South Africa’s right to tax, while also considering the complex tax rules in other countries and the contributions of expats and foreign retirees to the economy.
      • To address these issues, government will start a new round of discussions with stakeholders to find a fair solution that prevents double non-taxation but also considers the concerns raised by affected individuals.

      KPMG INSIGHTS

      Steps to Consider

      KPMG in South Africa states that, as the exemption for foreign-sourced retirement income is currently under review and may be amended, it is important to stay updated on any developments. Further consultations and potential changes to the law may be expected. Consider seeking professional advice to understand how any future changes could affect your personal tax situation and to help you plan ahead.

      If assignees and/or their programme managers have any questions or concerns about the scope of the amendment, its application and potential impacts, and appropriate next steps, they should consult with their qualified tax professional or a member of the GMS tax team with KPMG in South Africa (see the Contacts section).

      FOOTNOTES:

      1   Draft Response Document on the 2025 Rates and Monetary Amounts and Amendment of Revenue Laws Bill, 2025 Draft Taxation Laws Amendment Bill and 2025 Draft Tax Administration Amendment Bill, National Treasury of the Republic of South Africa, published on 4 November 2025.

      2  Draft Taxation Laws Amendment Bill 2025, National Treasury of the Republic of South Africa, published on 16 August 2025.

      Contacts

      sarika-rautenbach
      Sarika Rautenbach

      Partner

      KPMG in South Africa

      natasha-rohhamlal
      Natasha Rohhamlal

      Associate Director, Global Mobility Services and Employment Tax Advisory

      KPMG in South Africa

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      The information contained in this newsletter was submitted by the KPMG International member firm in South Africa.

      GMS Flash Alert is a Global Mobility Services publication of the KPMG LLP Washington National Tax practice. The KPMG name and logo are trademarks used under license by the independent member firms of the KPMG global organization. KPMG International Limited is a private English company limited by guarantee and does not provide services to clients. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.

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