Tax on Foreign Dividends and Interest in South Africa

If you are a South African tax resident, your foreign dividends and foreign interest are taxable here, but they are taxed in two quite different ways. Most foreign dividends are taxed at a maximum effective rate of 20%, thanks to a partial exemption. Foreign interest gets no such break: it is included in full and taxed at your marginal rate, and the local interest exemption does not apply to it. Residents are taxed on worldwide income, so this foreign investment income has to go on your return even though it was earned offshore.

The two rules differ sharply. A partial exemption caps the effective rate on most foreign dividends, while foreign interest is taxed in full at your marginal rate with no exemption to soften it.

Foreign dividends

A foreign dividend is a dividend from a company that is not a South African resident, for example shares in an overseas-listed company. Where you hold less than 10% of that foreign company, the dividend is taxed at a maximum effective rate of 20%. A partial exemption in section 10B gets you there: part of the dividend is exempt, and only the remaining portion is taxed at your marginal rate, so the effective rate on the whole dividend tops out at 20%.

Because it is a maximum, the effective rate is 20% only if you are on the top 45% marginal rate. If your marginal rate is lower, the effective rate on the foreign dividend is proportionally lower too. One catch: you cannot deduct expenses incurred to earn a foreign dividend.

This is different from a local dividend. A dividend from a South African company is generally exempt from normal tax in your hands, but the company withholds 20% dividends tax at source before you see it. The article on local dividends tax sets out that side.

Foreign interest

Foreign interest is interest from a source outside South Africa, such as an offshore savings account or bond. For a resident it is included in taxable income in full and taxed at your marginal rate. The local interest exemption, which shelters the first R23,800 of interest for people under 65 and R34,500 for those 65 and older, applies only to interest from a South African source, so foreign interest does not qualify for it.

So a rand of foreign interest is taxed exactly like a rand of salary at your marginal rate. If you paid tax on that interest in the foreign country, you may be able to claim a foreign tax credit under section 6quat to avoid being taxed twice, but the income itself is fully taxed here. Compare this with the treatment of local interest, which does get the exemption, in the article on tax on interest income.

A worked example

Take a resident on the top 45% marginal rate for the 2026 tax year who receives R50,000 of foreign dividends from a small overseas shareholding and R30,000 of foreign interest.

Foreign dividends. The maximum effective rate of 20% is the rate that applies at the top 45% bracket, so at this rate the tax is R50,000 x 20% = R10,000.

Foreign interest. There is no exemption, so the full R30,000 is added to taxable income and taxed at 45%: R30,000 x 45% = R13,500

Total tax on this offshore income is R10,000 on the dividends plus R13,500 on the interest. The smaller R30,000 of interest carries more tax than the larger R50,000 of dividends, because the dividends get the partial exemption and the interest does not. At a marginal rate below 45% both figures would be lower, and the dividend rate would fall below the 20% ceiling while the interest stayed at the full marginal rate.

You can model how this offshore income sits on top of your other income in the cross-border income calculator, and the broader rules for residents earning abroad are in the expat and foreign income guide.

Reporting it

Both amounts go on your ITR12 return. Foreign dividends and foreign interest have their own fields, and you convert the foreign-currency amounts to rand using an appropriate exchange rate. Keep the statements from the foreign institution and any proof of foreign tax paid, because SARS can ask for them, and the foreign tax is what supports a section 6quat credit.