SARS Foreign Income Tax Rules (2026)

South African residents are generally taxed on their worldwide income, including foreign income. Understanding how foreign income is taxed, exemptions available, and how to report it helps you comply with tax obligations. This comprehensive guide covers everything you need to know about foreign income tax rules in South Africa for 2026.

Who Is Taxed on Foreign Income?

Tax Residency

South African Residents:

• Taxed on worldwide income
• Includes foreign income
• Must declare all income
• Subject to SA tax

Non-Residents:

• Taxed only on SA-sourced income
• Foreign income generally not taxed
• Different rules apply
• Check residency status

Determining Residency

Factors:

• Physical presence in SA
• Intention to remain
• Family and economic ties
• Other factors

Important:

• Residency determines tax obligations
• Can be resident or non-resident
• Rules can be complex
• Get professional advice

How Foreign Income Is Taxed

General Rule

For Residents:

• Foreign income included in taxable income
• Taxed at normal rates
• Subject to SA tax brackets
• Must be declared

Currency Conversion:

• Convert to ZAR
• Use exchange rate at time
• SARS may specify rates
• Keep records

Exemptions and Exclusions

Foreign Employment Income:

• R1.25 million exemption (if certain conditions met)
• For employment outside SA
• Subject to specific rules
• Check eligibility

Other Exemptions:

• Some specific exemptions
• Double taxation relief
• Other provisions
• Check specific rules

Double Taxation Agreements

What They Are

Definition:

• Agreements between countries
• Prevent double taxation
• Provide relief mechanisms
• SA has many DTAs

Purpose:

• Avoid paying tax twice
• Provide tax credits
• Allocate taxing rights
• Simplify compliance

How They Work

Tax Credits:

• Foreign tax paid can be credited
• Against SA tax liability
• Reduces double taxation
• Subject to limits

Exemptions:

• Some income may be exempt
• Under DTA provisions
• Check specific agreement
• Country-specific rules

Reporting Foreign Income

On Your Tax Return

Process:

1. Convert to ZAR
2. Include in income section
3. Declare foreign income
4. Claim foreign tax credits if applicable
5. Complete return

Information Needed:

• Foreign income amounts
• Exchange rates used
• Foreign tax paid
• Country of source
• Other details

Documentation

Required:

• Foreign income statements
• Bank statements
• Tax certificates from foreign country
• Exchange rate records
• Other supporting documents

Keep Records:

• For 5 years
• All foreign income
• Supporting documents
• Exchange rate records

Foreign Employment Income Exemption

R1.25 Million Exemption

What It Is:

• Exemption for foreign employment income
• Up to R1.25 million per year
• Subject to specific conditions
• Significant benefit

Conditions:

• Must be employment income
• From services outside SA
• For more than 183 days
• Other requirements

Calculation:

• Foreign employment income
• Up to R1.25 million exempt
• Remaining taxable
• Subject to rules

Foreign Tax Credits

How They Work

Purpose:

• Avoid double taxation
• Credit foreign tax paid
• Against SA tax
• Reduce liability

Calculation:

• Foreign tax paid
• Credited against SA tax
• Subject to limits
• Cannot exceed SA tax

Limitations:

• Credit limited to SA tax on that income
• Cannot create refund
• Specific rules apply
• Check calculations

Common Scenarios

Scenario 1: Foreign Employment

Situation:

• Work outside SA
• Earn foreign income
• May qualify for exemption
• Must still declare

Action:

• Determine if exemption applies
• Declare all income
• Claim exemption if eligible
• Pay tax on remainder

Scenario 2: Foreign Investments

Situation:

• Investments outside SA
• Earn foreign income
• Subject to SA tax
• May have foreign tax credits

Action:

• Declare all foreign income
• Claim foreign tax credits
• Pay SA tax
• Comply with obligations

Best Practices

Keep Detailed Records

Maintenance:

• All foreign income
• Exchange rates
• Foreign tax paid
• Supporting documents
• Maintain for 5 years

Understand Rules

Knowledge:

• Know your obligations
• Understand exemptions
• Check DTAs
• Get professional advice

Plan Ahead

Considerations:

• Tax implications
• Exemption eligibility
• Foreign tax credits
• Compliance requirements

Frequently Asked Questions

Do I need to declare foreign income if I'm a SA resident?

Yes, South African residents must declare all worldwide income, including foreign income.

Is there an exemption for foreign income?

There's a R1.25 million exemption for foreign employment income if certain conditions are met.

Can I claim credit for foreign tax paid?

Yes, you can claim foreign tax credits to avoid double taxation, subject to specific rules and limits.

How do I convert foreign income to ZAR?

Use the exchange rate at the time the income was received. SARS may specify which rates to use.

What if I'm not sure about my residency status?

Consult a tax practitioner. Residency can be complex and affects your tax obligations.

Are there penalties for not declaring foreign income?

Yes, failing to declare foreign income can result in penalties, interest, and other consequences.

Conclusion

Understanding foreign income tax rules is essential for South African residents with foreign income. By declaring all foreign income, understanding exemptions, claiming foreign tax credits, and keeping proper records, you can comply with tax obligations. Remember that residency status is important, and the rules can be complex.

For assistance with foreign income tax or complex situations, consult a qualified tax practitioner with expertise in international tax.

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Related Articles:

• How to Submit Your Tax Return (2026 Guide)
• SARS Tax Brackets and Tables (2026)
• Provisional Tax Explained (2026)

Official Resources:

• SARS Website
• SARS eFiling
• SARS Call Centre