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South Africa Clarifies Foreign Pension Tax Exemption

by Lorys Charalambous, Tax-News.com, Cyprus

18 November 2014


In a binding general ruling (BGR), the South African Revenue Service (SARS) has clarified the interpretation and application of the wording "from a source outside the Republic" in the country's tax code, when relating to foreign pension payments that are received by or accrue to a South African resident.

In the BDR dated November 14, 2014, SARS's Legal and Policy Division notes that the income tax code "exempts from normal tax any pension received by or accrued to a resident from a source outside the Republic [of South Africa] as consideration for past employment outside the Republic."

However, it is also accepted that the term "source outside the Republic" could be interpreted to mean either the originating cause which gave rise to that pension (foreign services rendered), or the location from which the pension is received (namely, where the retirement fund is situated).

The BGR has now confirmed that the term "past employment outside the Republic" refers to services rendered outside the Republic; and that the term "source outside the Republic" for tax purposes relates only to that portion of a pension that relates to the originating cause, namely, the services rendered outside the Republic. Only the latter portion is therefore exempt from income tax.

TAGS: individuals | expatriates | South Africa | tax | investment | pensions | law | retirement | legislation | tax breaks | individual income tax | services | Africa

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