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. 

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:

• Personal income tax brackets
• Medical scheme tax credits (R376 for first two members; R254 for others)

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:

• still hold South African assets, or
• are in the process of ceasing residency and triggering exit tax under section 9H of the Income Tax Act,

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:

• Capital gains on immovable property, and
• Residual deferred gains arising from prior exit tax events (if applicable).

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:

• Expatriates who remain members of SA retirement funds and plan to continue contributing during the year of exit, or
• Individuals emigrating in 2026, who may use the higher cap as part of their pre‑exit planning strategy.

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:

• A tax compliance status (TCS) PIN, or
• Any proof of tax residency

This simplifies:

• Offshore remittances
• Family support payments
• Settlement of foreign expenses
• Transfers to personal offshore investment portfolios

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:

• The exemption no longer applies if the receiving spouse is a non-tax resident.
• Any donation will now be subject to 20% or 25% donations tax.

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:

• No new taxes
• No additional reporting
• No exit tax increase
• No amendments to foreign employment income rules
• Improved remittance flexibility for planning a transfer of funds ahead of ceasing tax residency
• Slightly improved CGT thresholds

The only noteworthy cautionary development is the restriction on spousal donations exemption, which may require restructuring for couples planning emigration or wealth transfers.

Written by John-Paul Fraser, Team Lead: Cross Border Taxation at Tax Consulting SA