South African taxpayers are in for a few unpleasant surprises if the proposed 2025 Draft Taxation Laws Amendment Bill becomes law. Released by National Treasury and SARS in August, the draft legislation aims to close loopholes and broaden the tax base—but critics warn that it could erode savings and increase costs for ordinary citizens.

Foreign Retirement Funds: No more exemptions

One of the most controversial changes is the removal of the exemption on foreign retirement benefits. Currently, South Africans returning from work abroad can receive pensions or lump sums from foreign funds without paying local tax. From 1 March 2026, these benefits will be fully taxable in South Africa, even if the original contributions were made from after-tax income overseas.

Most of us would argue this could lead to double taxation and discourage skilled expatriates from returning home. While Treasury points to double tax agreements (DTAs) as a safeguard, most treaties do not exempt foreign pensions from South African tax. This means retirees could face hefty bills on money they thought was safe.

Collective Investment Schemes under fire

Investors in unit trusts and collective investment schemes (CISs) may also feel the pinch. Treasury plans to scrap tax-neutral treatment for fund mergers and remove roll-over relief for asset-for-share transactions. Currently, these provisions allow investors to transfer shares or units without triggering immediate capital gains tax (CGT). Under the new rules, such transfers could become taxable events.

Additionally, any distribution from a CIS that is not income will be treated as a capital gain, taxable in the hands of the investor—even if they haven’t sold any units. Analysts warn this could create “stealth taxes” and undermine the attractiveness of CISs as a savings vehicle. 

Other key changes

• Ring-fencing of losses: The income threshold for ring-fencing non-commercial losses will be lowered, making it harder for taxpayers to offset hobby-related expenses against other income.
• VAT on low-value imports: The current tax-free limit on imported goods will be removed, meaning even small online purchases from abroad will attract VAT.
• Carbon tax adjustments: Higher rates for emissions above carbon budgets and extended allowances are on the cards, impacting businesses and potentially consumers through higher energy costs.

Why is National Treasury proposing these changes?

Treasury argues that these measures are necessary to prevent tax avoidance and ensure fairness. However, critics say the proposals could have unintended consequences, such as discouraging investment and increasing the cost of living. The withdrawal of an earlier plan to redefine “hybrid equity instruments” after industry backlash shows that government is listening — but many fear the remaining changes will still hit hard.

What happens next and should I be worried?

The draft bill was open for public comment until mid-September, after which a revised version will go to Parliament. If passed, most changes will take effect from March 2026. Taxpayers should review their savings plans and consult Certified Financial Planners or Registered Tax Practitioners to prevent unexpected issues, as early planning and proper strategies can reduce or eliminate risks and avoid nasty surprises.

Please note that the above is for information purposes only and does not constitute tax/financial advice. As everyone’s personal circumstances vary, we recommend they seek advice on the matter. While every effort is made to ensure accuracy, Nexia SAB&T does not accept responsibility for any inaccuracies or errors contained herein.

Article prepared by: Stefan Diederiks CA(SA)

Registered Tax Practitioner

For any queries or further information, please contact:

•         Mansoor Salee - Director

M: (+27) 82 454 4786| E: mansoor@nexia-sabt.co.za

•         Yousuf Hassen - Director

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