Equilibrium Pensions

The Offshore Pension Environment for South Africans

South Africa (“RSA”) levies no tax arising from foreign pensions under the Income Tax Act 58 of 1962. The aim of this legislation is the entirely self fulfilling one of promoting RSA as a destination for retiring pensioners who have worked and saved all their lives in other countries. The uplift in commercial enterprise for such a policy is significant - providing much needed employment and commercial activity all paid for by pensions whose tax reliefs were generously provided by countries other than RSA.

These rules were amended in March 2017 in which the exemption of foreign pensions from South African income tax will only apply to amounts received or accrued from a foreign retirement fund or amounts that were transferred to a local retirement fund from a foreign retirement fund and constitute consideration for services rendered outside South Africa in terms of past employment. Thus contributions from overseas earnings should not be made to local schemes.

The second interim Report on Estate Duty for the minister of finance by the Davis Group has recently been published. The Committee believes that offshore pensions should not be used by SA taxpayers who have never worked overseas. Believing that the arrangement is taxable in the hands of the SA resident taxpayer and recommended that the above arrangements be further investigated by SARS


The interesting development in this whole fairly complex area is the issue of Expatriate and AfriPat workers complying with the offshore requirements but whose employers have yet to acknowledge the change in the rules and continue to offer a single RSA based pension solution no matter their country of residence for work. These employers should urgently consider the option of setting up a proper offshore occupational pension scheme for their employees that comply.


  1. Any RSA resident who has never worked ex RSA in any meaningful capacity should be very wary of schemes promising to externalise their allowances and capital into open ended schemes.
  2. Employers whose RSA based pension schemes have expatriate or AfriPat workers within the main RSA fund should look as a matter of urgency into setting up a genuine offshore arrangement for those employees that comply; this would allow those fulfilling the criteria (of working ex RSA) to benefit from: CGT free capital growth, No donations tax, No income tax on growth, No Currency or exchange taxes, 0% tax on benefit withdrawals and a well regulated and supervised environment.


SARS needs to promote South Africa as a safe and stable place to retire to for expatriates and returning AfriPats. Part of that “sell" is of course improving security, but the other side is the requirement to enable these pensioners to spend their pensions earned elsewhere in a tax free environment received in their currency of choice which normally is the currency they earned the savings in the first place. RSA has 25% unemployment, an unstable currency, inconsistent government and many other challenges. The offshore pension regimen is one of the most positive initiatives that RSA needs to survive and forms an essential part of the vibrancy of an economy that needs the income taxes (derived from wages of those employed by those drawing offshore pensions) and sales taxes thus generated to survive.