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.
Conclusion
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.