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Removal of foreign service retirement fund tax exemption

Current tax position

Currently, s 10(1)(gC), as read with s 9(1)(i) of the Income Tax Act, exempts the receipt of a foreign pension arising from employment services rendered outside the Republic (140 tsh 2014).

Rationale for amendment

sars has adopted the rationale that, since contributions to a domestically approved retirement funds were tax-deductible (even for a resident rendering employment services outside the Republic), the proceeds should be subject to tax in the same manner as onshore-service retirement benefits.

Post 1 March 2017 position

The foreign-service retirement fund exemption is deleted, and the s 10(1)(gC)(ii) exemption will be restricted to foreign-based retirement funds.


This amendment is effectively retrospective, in that it will negatively impact upon retired persons with foreign service in receipt of an annuity, who previously enjoyed this concession.