The South African Service (SARS) has clarified the foreign pension tax exemption system relating to foreign pension payments that are received by or accrue to a South African resident under Binding General Rulings (BGR). A Binding General Ruling (BGR) is issued on matters of general interest or importance and clarifies the Commissioner’s application or interpretation of the tax law.
In the BGR dated November 14, 2014, SARS’s Legal and Policy Division notes that the income tax code “exempts from normal tax any pension received by or accrued to a resident from a source outside the Republic [of South Africa] as consideration for past employment outside the Republic.In addition, the term “source outside the Republic” can be interpreted to mean either the originating cause which gave rise to that pension (foreign services rendered), or the location from which the pension is received (namely, where the fund is situated).
The term “past employment outside the Republic” refers to services rendered outside the Republic. Only the portion of a pension that relates to services rendered outside the Republic is exempt from income tax.
