Is my foreign pension fully tax free in South Africa?

It is exempt to the extent it relates to employment performed outside South Africa. If your whole career of service was abroad, the pension is fully exempt, and you still declare it. If part of the service was in South Africa, that part stays taxable.

Do I still have to declare a foreign pension if it is exempt?

Yes. Worldwide income is declared whether or not it is taxed. The exemption lowers the tax, but the reporting obligation remains.

How do I work out the exempt portion?

Divide the years of service rendered outside South Africa by the total years of service, then apply that fraction to the pension. The remaining fraction, relating to South African service, is the taxable portion.

Can I claim the foreign tax I paid on the pension?

On the taxable South African-service portion, a section 6quat rebate can offset foreign tax paid on the same income, and a double tax agreement may further limit or remove South African tax. The exempt portion needs no such relief, since it is already not taxed here.

Was this exemption removed in 2025?

No. A proposal to scrap it was put forward and then withdrawn, so section 10(1)(gC)(ii) remains in force.

How is a foreign pension taxed in South Africa?

If you are a South African tax resident, your foreign pension forms part of your gross income, because residents are taxed on worldwide income. Section 10(1)(gC)(ii) then exempts the part of that pension that pays for past employment rendered outside South Africa, which in practice covers most or all of it. Where the underlying career was partly in and partly outside the country, you apportion the pension, and only the South African-service portion stays taxable at your marginal rate.

Worldwide income is the starting point

A resident declares all income, wherever it arises. A pension, annuity or lump sum from a foreign fund is no exception, so it goes into your return even in a year when the final tax on it is nil. Declaring an amount and paying tax on it are two different steps.

The exemption for past foreign service

Section 10(1)(gC)(ii) exempts a lump sum, pension or annuity received by or accrued to a resident from a source outside South Africa as consideration for past employment outside the Republic. Amounts received under another country's social security system are exempt on the same basis.

What matters is where the work was done, not where the money is now paid from. So a pension you earned by working abroad stays exempt after you move back to South Africa and become resident again.

A 2025 proposal to scrap this exemption was put forward and then withdrawn, so the exemption stands.

Apportionment when the career was split

If your service was partly inside and partly outside South Africa, the pension is split in proportion to the periods of service:

Exempt portion = (foreign-service period / total service period) of the pension
Taxable portion = the remaining share, relating to South African service

The South African-service portion is taxed at your marginal rate. Where your entire career of service was outside South Africa, the whole pension is exempt, and you still declare it.

Worked example

A 60-year-old resident receives a foreign pension of R500,000 for the 2026 year of assessment. Over a 30-year career, 18 years of service were rendered outside South Africa.

Step 1, find the exempt fraction:

18 / 30 = 0.6, that is 60%

Step 2, split the pension:

Exempt portion: R500,000 x 60% = R300,000
Taxable portion: R500,000 - R300,000 = R200,000

Step 3, tax the taxable portion. At 60 the person is under 65, so only the primary rebate applies. R200,000 falls inside the first bracket (R1 to R237,100), taxed at 18%:

R200,000 x 18% = R36,000
Less primary rebate: R36,000 - R17,235 = R18,765

Tax for the year is R18,765 on the pension.

Now suppose all 30 years of service had been outside South Africa. The exempt fraction would be 30 / 30 = 100%, the whole R500,000 would be exempt, and the tax would be nil. The amount would still be declared.

Foreign tax already paid, and treaties

Only the taxable South African-service portion can attract South African tax, so that is where relief for foreign tax comes into play. A section 6quat rebate can reduce the South African tax on that portion by foreign tax paid on the same income. A double tax agreement between South Africa and the source country can also allocate taxing rights, and in some cases it gives one country the sole right to tax the pension. Check the specific treaty before you assume both countries will tax the same amount.

Not the same as the foreign employment exemption

People often confuse this with the section 10(1)(o)(ii) foreign employment income exemption, which covers up to the first R1,250,000 of employment income earned while working abroad as a resident employee. That provision deals with current salary for work done abroad. Section 10(1)(gC)(ii) deals with a pension for past work done abroad. They are separate provisions, with separate conditions.