What appears to be part of a broader retirement reform in South Africa, the Minister proposed a further review of the aspects relating to foreign pension contributions, annuities and exits from those funds.

This follows hot on the heels of at least some uncertainty being taken away on the issue of Binding Private Ruling 25 on 14 November 2014, which exempted foreign pensions on the basis of the source being outside South Africa. Where an apportionment of foreign source is required, it could result in at least a portion being potentially subject to normal tax in South Africa. The ruling was, however, silent on lump sums which continues to be uncertain.

Although the issue of contributions to a foreign pension fund did not form part of the ruling, by applying basic tax principles, it follows that deductions would generally not be allowed to the extent that the eventual return is in the form of exempt income. As part of the broader reforms and reviews contemplated by the Minister, the aforementioned aspects would need to be carefully considered, as it may require similar apportionment methodology as that relating to the income itself. In addition, the application of certain Double Tax Agreements would need to be considered that specifically allow for the deduction of contributions in South Africa even though those contributions are made to foreign funds.

The Minister did, however, state that sufficient time would be required to consult with the necessary stakeholders.