Pension and annuity income withdrawal
Retirement income payable in South Africa can be remitted to beneficiaries offshore. Let us help you navigate the process.
Are there tax payable on pensions and annuities in South Africa?
Retirement income payable in South Africa is deemed to be from a South African source and it will in general be subject to tax in South Africa. However, this income may also be subject to the provisions of a Double Taxation Agreement that may exist between South Africa and the existing country of residence, which will determine the ultimate taxing rights.
Most periodic annuities and pensions are taxed in full in South Africa, regardless of tax residency. This means you’ll need to include the income in your South African tax return in your new country of residence as well.
Requirement to pay pension and annuity income into a South African bank account.
All income from retirement funds must be paid to a South African bank account before the funds can be remitted offshore. This is an exchange control requirement, and any offshore transaction must be executed through a commercial bank in South Africa.
Double Taxation Agreements and Tax Exemption
South Africa is party to many Double Taxation Agreements. The purpose of these agreements is to eliminate double taxation, which means that certain income will only be taxed once. This means that you might be eligible for tax relief in South Africa, resulting in the annuity or pension income being taxable only in your new country of residence.
To qualify for such tax relief in South Africa, an RST01 application must be made to the South African Revenue Services. An RST01 is an application by a tax non-resident for a directive for relief from South African tax for pension and annuity income, in terms of a Double Taxation Agreement. This application must be renewed annually.
If you’ve paid tax on your South African annuity and pension income in South Africa (administrators will usually withhold Pay as You Earn (PAYE) from the income before paying it across to you, unless the directive mentioned above has been issued), you are eligible to claim a refund for the tax paid by submitting an RST02.
An RST02 is an application by a tax non-resident for a refund of South African tax for pension and annuity income in terms of a Double Taxation Agreement.
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