For the first time in many years, Budget 2026 placed no new tax burdens on non-tax resident expatriates, maintaining stability and predictability for those who have formally ceased South African tax residency.
John-Paul Fraser
Team Lead: Cross Border Taxation
While the focus of this year’s Budget is on restoring inflationary adjustments for South African tax residents, several changes remain relevant for individuals who have already ceased South African tax residency or are planning to do so.
Non‑Tax Residents: No New Adverse Measures Introduced
A notable feature of Budget 2026 is what it does not do: No new taxes, anti-avoidance rules, or compliance obligations are introduced for South African non-tax residents—outside of one targeted measure dealing with spousal donations.
This will come as welcome news for expatriates who are often monitoring changes to capital gains tax (CGT), foreign income rules, offshore investment reporting, or exit tax provisions.
Foreign Pension Fund Exemption Left in Peace
The Budget brought reassuring clarity by making no proposals to amend or remove the long‑standing foreign pension exemption under section 10(1)(gC)(ii).
In November 2025 National Treasury withdrew its highly contested proposal to remove the tax exemption for foreign pensions applying to South African tax residents and elected to follow a more consultative process for any future recommendation.
For now, this continuity offers valuable peace of mind for expatriates and globally mobile South Africans. It also reinforces confidence in South Africa’s commitment to balanced, consultative tax reform rather than abrupt changes that could unsettle long‑term financial planning.
Inflationary Adjustments: Limited Relevance to Non‑Residents
Treasury has applied full inflationary increases of approximately 3.4% to:
These adjustments substantially benefit South African tax residents.
However, for non-tax resident expatriates, these updates generally have no direct impact, unless they still earn South African‑sourced income subject to PAYE, or they contribute to a local medical scheme and claim deductible expenditure via a return, which is increasingly uncommon.
Capital Gains Tax: Annual Exclusion Increased to R50,000
For expatriates who:
the annual CGT exclusion increases from R40,000 to R50,000 for the 2026 year of assessment.
For non-residents, this exclusion applies primarily to:
Tax-Free Investment Annual Limit Increased to R46,000
Although the annual contribution limit for Tax-free savings accounts (TFSAs) rises from R36,000 to R46,000, this is largely irrelevant for non-residents, because TFSA contributions cannot be made by non-tax residents, and growth within TFSAs remains fully taxable in the new country of residence unless that country specifically exempts it.
Expatriates holding pre-existing TFSAs should note that no South African tax arises on ongoing growth, but they cannot add new contributions after ceasing residency.
Retirement Fund Contribution Deduction Cap Increased
The increase of the annual retirement deduction ceiling from R350,000 to R430,000 is aimed at residents.
However, this may be relevant for:
Notably, non-tax residents cannot deduct contributions because they no longer file SA tax returns, unless South African sourced income thresholds necessitate a return.
Single Discretionary Allowance Doubled to R2 Million
This is one of the most practically beneficial changes for expatriate tax residents.
From 2026, individuals may transfer up to R2 million per calendar year out of SA without needing:
This simplifies:
For those embarking on the process to become non-tax residents, this increases annual flexibility to transfer their South African funds offshore ahead of their relocation and ceasing of tax residency.
Anti-Avoidance: Spousal Donations Exemption Restricted (Effective 25 Feb 2026)
This is the single targeted measure in the 2026 Budget affecting expatriates.
Government has closed a loophole where some couples structured their tax residency cessation to reduce exit tax exposure by having one spouse becoming a non-tax resident first, while the remaining spouse transfers assets tax‑free to that spouse under the spousal donations exemption. In doing so, this allows the remaining spouse to emigrate with a significantly reduced asset base.
From 25 February 2026, the spousal donations exemption applies only when the recipient spouse is a South African tax resident.
For expatriates:
This is a significant change for mobility planning, family structuring, and pre-emigration arrangements.
Overall Assessment for Non‑Tax Residents
Budget 2026 can be summarised for expatriates as: “Calm waters—with one important reef to avoid.”
For non-tax residents:
The only noteworthy cautionary development is the restriction on spousal donations exemption, which may require restructuring for couples planning emigration or wealth transfers.
