The 2026 Draft Taxation Laws Amendment Bill makes the recipient spouse’s tax residence the decisive question — and proposes to do so from 25 February 2026.

National Treasury has published draft legislation that would limit the donations tax exemption between spouses where the recipient spouse is a non-resident for tax purposes, following government’s identification of avoidance arrangements relying on the deliberate, staggered cessation of tax residence by spouses. 

The proposal in the Draft Taxation Laws Amendment Bill (TLAB), published for public comment on 30 July 2026, targets a narrow, timing-driven tax planning arrangement involving a limited number of high-net-worth individuals for whom such an arrangement results in a substantially reduced, or zero tax liability. 

According to the accompanying Explanatory Memorandum on TLAB:

“This avoidance arrangement enables the tax-free transfer of wealth offshore, undermining the policy intent of both the inter-spousal exemption and the Capital Gains Tax regime, and resulting in an erosion of the South African tax base.”

For decades, the first question in an inter-spousal donation was straightforward: Are the parties spouses?

Under South Africa’s 2026 draft tax amendments, that question may no longer be enough.

The better question is: Was the recipient spouse still a South African tax resident when the donation was made?

The answer may determine whether the transfer remains fully exempt or becomes subject to donations tax in the ordinary course.

The Exemption Has Acquired a Border

Treasury has not proposed abolishing the inter-spousal donations tax exemption. It has proposed drawing a residency line through it.

Clause 17 of the 2026 Draft TLAB Bill would amend section 56(1)(a) and (b) of the Income Tax Act so that a donation to or for the benefit of a spouse qualifies for the exemption only if that recipient spouse is a South African tax resident.

A donation by a resident spouse to a non-resident spouse would therefore no longer enjoy the unlimited spousal exemption. Subject to the remaining exemptions and valuation rules — including the current R150 000 annual exemption for a natural person — donations tax may be levied at 20% on cumulative donations up to R30 million and 25% above that threshold.

The draft proposal is not yet enacted and may change through the legislative process. However, it is drafted to operate from 25 February 2026 and to apply to donations made on or after that date. 

Public comments on the draft bill close on 28 August 2026.

The Arrangement Treasury Wants to Stop

The stated target is not the ordinary movement of assets between spouses. The proposed amendment introduces a limitation on the inter-spousal donations tax exemption associated with a limited number of high-net-worth emigration cases.

The sequence is simple. One spouse first ceases South African tax residence. The remaining resident spouse then transfers substantial assets to the now non-resident spouse under the inter-spousal exemption. The remaining spouse later ceases residence with a materially reduced asset base.

Section 9H ordinarily treats a person who ceases South African tax residence as having disposed of certain worldwide assets at market value on the day before cessation. By moving the assets before the second spouse exits, the arrangement is intended to reduce — or potentially eliminate — that spouse’s section 9H liability.

The Technical Point That Cannot Be Ignored

This is where the legal analysis becomes more nuanced.

Section 9HB already limits the normal rollover treatment for assets transferred between spouses where the recipient spouse is not a South African tax resident, save for specified assets that remain within the South African tax net. A transfer to a non-resident spouse may therefore trigger a capital gains tax consequence at the time of transfer.

This makes Treasury’s description of complete capital gains tax avoidance less straightforward than it first appears. It does not, however, make the proposed section 56 amendment irrelevant.

The two provisions answer different questions. Section 9HB determines whether the inter-spousal rollover applies for income tax and capital gains tax purposes. Section 56 determines whether the donation itself is exempt from donations tax.

The practical consequence is that one inter-spousal transfer may fail the section 9HB rollover and also fail the proposed section 56 exemption. The same transaction could therefore require separate capital gains tax and donations tax calculations before the later section 9H exit charge is considered.

Staggered Cessation Is Not the Abuse

Spouses do not automatically cease South African tax residence on the same date. Tax residence is determined separately for each person, based on the law and that person’s facts.

Legitimate differences in timing are common. One spouse may leave first for employment while the other remains temporarily for children’s schooling, the sale of a home, medical care, dependent family responsibilities or the orderly conclusion of local affairs.

Nothing in the proposal suggests that these arrangements are inherently objectionable. The concern is the use of the timing difference to move substantial wealth to the non-resident spouse immediately before the remaining spouse ceases residence.

The legal response should therefore not be to manufacture a common cessation date where the facts do not support one. It should be to establish each spouse’s correct residency date and then analyse every transfer against that chronology.

Why the Proposed Effective Date Matters Now

Although the amendment remains draft legislation, its proposed retrospective operation is deliberate. Couples who transferred assets on or after 25 February 2026 cannot safely assume that the historic spousal exemption will remain available simply because the Bill had not yet been published when the transfer occurred.

For high-net-worth families, the difference is not technical. A transfer that was expected to be tax-neutral could create a material and immediate donations tax exposure, potentially alongside capital gains tax.

The immediate task is therefore not to panic or reverse legitimate transactions. It is to identify the transfers, establish the residency status of both spouses on the relevant dates, and quantify the position before the legislation is finalised.

What Emigrating Couples Should Do

Couples with cross-border assets or different residency timelines should now:

• Confirm the correct residency chronology. Determine each spouse’s status under South African domestic law and any applicable Double Tax Agreement on the precise date of each transfer. 
• Review transfers made from 25 February 2026. This should extend beyond obvious gifts to shares, investment portfolios, loan waivers, funding arrangements and other gratuitous disposals of property. 
• Analyse each tax separately. The donations tax exemption, section 9HB rollover and section 9H exit charge must not be collapsed into a single conclusion. 
• Preserve evidence and valuations. Contemporaneous documents should explain the asset, its market value, the commercial or matrimonial purpose of the transfer and the parties’ residency positions. 
• Reconsider further transfers before implementation. Last-minute transfers driven primarily by tax, particularly without clear estate-planning, matrimonial or commercial substance, are likely to attract greater scrutiny. 
• Prepare for compliance if the proposal is enacted. Potential declarations, payment dates and cash-flow exposure should be modelled early rather than addressed only after SARS raises a query. 

Final Thoughts

The proposed amendment is narrow in wording but substantial in consequence.

Marriage remains relevant. It may simply no longer be sufficient.

For years, the first question was whether the donor and recipient were spouses. Going forward, the correct first question may be: Was the recipient spouse a South African tax resident on the date of donation?

In cross-border tax, timing has always mattered. Treasury now proposes that residency at the moment of transfer matters just as much.

The exemption has not disappeared. It has acquired a border.

Written by Delano Abdoll, Legal Manager: Cross-Border Taxation at Tax Consulting South Africa; and Mbalenhle Mahlaba, Team Lead: Expatriate Tax at Tax Consulting South Africa