If you’re a South African expat receiving pension or annuity income from back home, there’s good news: you may qualify for relief from South African income tax or even a tax refund, thanks to Double Taxation Agreements (DTAs). These agreements are in place to ensure that your hard-earned retirement income isn’t unfairly taxed in both countries.

Let’s unpack what this means for you, how you can apply, and how to claim any withholding tax refund you may be entitled to.

Why am I still paying tax in SA if I live abroad?

South Africa, like many countries, imposes income tax on money earned within its borders. That means if you’re receiving a pension annuity from a South African fund, the South African Revenue Service (SARS) sees it as income from a South African source—even if you’re living in another country.

But if you’re a non-resident for tax purposes, and your new home country has a double tax agreement with South Africa, you may be eligible for a tax exemption for non-residents on this income. In short: you shouldn’t have to pay income tax in South Africa if you’re already being taxed on that same income in your country of residence.

Read more: South African tax residency rules – expats, are you still tax residents of South Africa?

How do I qualify for tax relief or a refund?

To qualify for this kind of tax relief on pension income, you need to be a non-tax resident of South Africa, meaning you’ve formally ceased tax residency through tax emigration. You must also:

1. Be receiving pension and/or annuity income (excluding lump sum withdrawals),
2. Be a tax resident in a country that has a DTA with South Africa, and
3. Be able to prove that the income is included in your taxable income abroad, and has already been paid.

Under the South African Income Tax Act, your eligibility hinges on both local tax laws and international tax treaties.

Top tip: If you’ve already had employees’ tax (commonly known as PAYE) withheld from your pension or annuity, and you meet the above criteria, you can apply for a withholding tax refund.

Read more: Explained: tax relief vs tax refunds in South Africa.

How to stop tax from being withheld: the tax directive route

If you’re a South African expat receiving income from a pension or annuity fund in SA, you can apply for a tax directive using the RST01 form. This lets SARS know not to withhold tax from your retirement income based on the double taxation agreement with your country of residence.

What is a tax directive in South Africa?

A tax directive is an instruction from SARS to a payer—such as a retirement fund administrator or long-term insurer—that tells them how much Employees’ Tax (PAYE) to withhold from a specific payment.

If you’re a non-resident, you can apply for a directive that grants you relief from South African income tax on your pension or annuity income under a Double Tax Agreement. This is not automatic—you must apply for the directive before the tax is withheld.

How to apply for a tax directive from SARS:

You’ll need to complete and submit the RST01 form “Application by Non-Resident for a Directive for Relief from South African Tax for Pension and Annuities in terms of a DTA“. Here’s what to do:

1. Register for income tax in South Africa (you must have a tax number)
2. Log in to SARS eFiling to access and complete the RST01 form
3. Indicate your country of tax residence
4. Provide a certificate of tax residency
5. Submit an employment history on company letterhead, showing time worked in and outside SA while contributing to the pension fund
6. Supply proof that the income is taxed in your country of residence, which must be less than one year old
7. Wait for SARS to evaluate your application (usually within 21 working days)

As of 2024, this tax directive is valid for three years—provided you remain in the same country and continue to qualify as a non-resident for tax purposes.

When will my tax directive be rejected?

Your application may be rejected if:

• Your South African tax affairs aren’t up to date
• You didn’t submit required documents
• The pension/annuity income is not included in your foreign tax assessment
• The DTA allows South Africa to tax the income

In that case, you might still be able to claim a pension tax refund.

Already paid tax? Here’s how to request a refund from SARS

If you didn’t have a directive in place and tax was withheld, don’t worry, you may still be able to get a South Africa tax refund.

Let’s look at the step-by-step SARS refund process:

1. Complete your ITR12 on eFiling (or appoint someone in SA to submit it for you).
2. Ensure you have your IRP5 certificate from the fund.
3. After assessment, if tax was wrongly withheld, submit an objection or a Request for Reduced Assessment along with the RST02.
4. Include your bank statement, ID/passport, proof of residence, and proof that the income was taxed in your resident country.

Read more: Don’t leave money on the table – understanding South Africa’s tax refund process for expats.

Be aware that SARS can reject your refund request if:

• You don’t submit all the necessary documentation
• The tax affairs linked to your SA tax number aren’t up to date
• There’s no valid DTA in place with your country of residence

Read more: Missing out on tax refunds in South Africa? Common mistakes expats make.

Understanding your tax residency status

Your tax treatment from SARS hinges on your status as a South African tax resident or non-resident. If you’ve formally emigrated through SARS, you’re considered a non-tax resident. This means you’re only liable for South Africa tax on income sourced from SA (such as rental income, or income from your pension or annuity) and not your worldwide income.

If you’re unsure, it’s worth checking your South African tax residency status with a professional. The rules can be complex—especially when it comes to understanding terms like residency tests, source-based taxation, and foreign tax credits that are used in tax legislation.

How do tax treaties work in South Africa?

Double tax agreements exist to avoid double taxation on the same income. South Africa has DTA agreements with many countries including the UK, Australia, New Zealand, Canada, and Germany. These agreements specify:

• Which country has the right to tax which types of income
• Whether income should be exempted in one country
• Or if a credit will be given for taxes paid in the other

In most cases for pension and annuity income, the country of residence is the one that has taxing rights, and SA will exempt the income from tax—provided you follow the right procedure.

Read more: It’s complicated – South African expats face double tax relief hurdles with SARS.

Common tax terms and forms explained

• Income tax in SA: Tax paid on income earned within or from South Africa.
• ITR12: Your individual income tax return form.
• RST01: Used to request a tax directive for relief under a DTA.
• RST02: Used to request a refund where tax was withheld incorrectly.
• IRP5: Tax certificate showing your income and tax deducted.
• Withholding tax: Tax deducted at source (by the fund or insurer) before income is paid to you.

The FYI on tax and retirement annuities and lump sum withdrawals

It’s important to remember that the pension and annuity tax relief applies to regular payments and not lump sum withdrawals. If you’re looking to access a retirement annuity in South Africa or make a pension fund withdrawal, the rules—and tax rates for annuity withdrawals—are different.

However, if you’ve emigrated and now qualify as a non-resident, different tax rules may apply when you withdraw from your retirement fund. This is where tax directives and pension tax benefits can help ensure you’re not overpaying.

FinGlobal is here to ensure you don’t leave money on the table

Figuring out South Africa’s income tax rules as a non-resident can feel overwhelming, but there is a clear path to tax relief—and in many cases, even a pension tax refund.
If you’re unsure where to start, let FinGlobal help you handle the paperwork, deal with SARS, and ensure your pension income from South Africa is correctly taxed—or not taxed at all, if you’re entitled to that tax relief.

Interested in learning how we can help streamline your South African income tax? Leave your contact details below and we’ll be in touch soon to discuss tax refunds and expat tax relief on pension and annuity income.