Following years of South Africans moving abroad, a noticeable shift is taking place as many return home and others choose South Africa as their home for the first time. South Africa is an attractive place to live, retire or spend part of the year. In this article, we consider the fiscal implications of a move to South Africa for individuals with foreign assets and foreign investment structures.

Does a move to South Africa result in a change of tax residence status?

South Africa has a “residence” basis of taxation. South African tax residence is not determined only by citizenship, immigration status or the purchase of immovable property. A natural person becomes tax resident in South Africa under our domestic laws if they are either “ordinarily resident” in South Africa or not “ordinarily resident” but meet the physical presence test, unless they are treaty resident in another jurisdiction which is party to a double tax treaty with South Africa.

In broad terms, a person is ordinarily resident in South Africa if South Africa is their real or settled home, the place to which they would naturally return after temporary periods of absence. The ordinary residence test is a factual enquiry that considers numerous factors to objectively determine whether a person has strong ties to South Africa such that it is regarded as their most settled place of residence.

A person who is not ordinarily resident may still become tax resident under the physical presence test if they spend sufficient time in South Africa over a five-year period. There is a misconception that a person who moves to South Africa can only become tax resident after a five-year period. A person can become “ordinarily resident” in South Africa from their date of arrival if there are sufficient ties indicating they intend to make South Africa their “new home”. Only if this is inconclusive (i.e. they retain strong ties in another jurisdiction) will the physical presence test become relevant.

In either case, the provisions of a tax treaty should be considered to determine whether a person is regarded as treaty resident in another country. If so, treaty residence will trump, and they will not become tax resident in South Africa even if they meet one of the local tests. In practice, it is unlikely that a person will meet the ordinary residence test, yet be treaty resident in another jurisdiction.

Impact of South African tax residence

Upon becoming tax resident in South Africa, the new resident becomes subject to worldwide tax, but to ensure that worldwide tax is applied only from the date of residence, new residents receive a tax base for their worldwide assets equal to market value on that date. It follows that only the post-residence growth in these assets is exposed to South African tax. For this reason, it is important to have all assets valued on becoming tax resident.

Conversely, when South African residence ceases, the residents are deemed to dispose of their worldwide assets at market value at the time, giving rise to an exit charge on the appreciation of their worldwide assets. Unless the jurisdiction they are moving to allows a similar step-up in base, the same amount may be taxed again by another jurisdiction upon their actual disposal.

Excluded from these rules to step-up base upon becoming tax resident and the exit charge upon cessation of residence are assets such as South African fixed property which remain within the South African tax net irrespective of tax residence.

The tax implications of a move to South Africa can extend to the tax position of any foreign companies, trusts, foundations or other structures in which new residents hold interests. Any involvement in the management of foreign entities from South Africa may draw those foreign entities into the South African tax net.

In addition, South Africa has a variety of tax rules to attribute income or gains arising in foreign structures to South African tax-residents. Amounts arising in a controlled foreign company (essentially a company in which South African residents hold more than 50% of the participation rights) are generally attributed to the South African shareholders in proportion to their shareholding. Where the foreign company is not passive or is subject to tax which is comparable to South African taxes, these rules normally do not apply.

Another set of attribution rules can apply when South African residents enter into transactions which benefit non-residents at the expense of the South African resident, for example a donation or an interest-free loan to a non-resident. In such cases, the South African resident could be subject to South African tax on amounts received by the foreign resident as a result of the donation or the benefit of not paying interest.

Cross-border loans and other transactions with connected non‑residents need to be reviewed, to determine whether they comply with arm’s-length terms to avoid the application of the onerous South African transfer pricing provisions.

All is not bad news, though. Moving to South Africa also holds opportunities to plan foreign asset holding prior to arriving in South Africa. Foreign structures funded with proper planning before South African tax residence commences can be a tax-efficient way of investing.

Income and gains derived by South African tax residents

South African tax residents are, in principle, taxed on worldwide income and capital gains, subject to any relief in terms of applicable tax treaties or rebates for foreign tax paid. This means that the South African tax implications of foreign-source income, pension payouts, trust distributions, and gains on foreign investments should all be considered.

Without attempting to be comprehensive, we discuss a couple of typical foreign investment streams derived by foreigners moving, or ex-South Africans returning, to South Africa.

Foreign pensions

In terms of many of South Africa’s tax treaties, South Africa is allocated exclusive taxing rights in relation to pension payments received by South African tax residents. However, South Africa exempts foreign pensions derived as a result of past employment outside South Africa. In these cases, the tax efficiency of retirement in South Africa is obvious.

Foreign dividends

Generally, South Africa will levy tax at a maximum rate of 20% on foreign dividends, subject to credits for foreign taxes on these dividends. Tax treaties may limit the foreign tax which can be levied (and thus credited in South Africa).

Foreign dividends on equity interests of 10% or more are likely to qualify for the participation exemption on foreign dividends.

Foreign interest

South Africa taxes foreign interest of residents at maximum income tax rates, subject to tax credits for foreign taxes levied.

Foreign capital gains

South African tax residents who are natural persons are subject to capital gains tax at a maximum rate of 18% on any capital gains derived from the disposal of their worldwide assets, subject to tax credits for foreign taxes payable. Gains are determined with reference to the stepped-up tax base for assets on becoming tax resident in South Africa, as explained above.

The disposal of substantial foreign equity interests (10% or more) held for 18 months or longer can qualify for the foreign capital gains participation exemption, in which case no South African tax will be payable.

Foreign rental income

Generally, tax treaties allocate primary taxing rights to the country where the rental-earning property is situated. South Africa would, however, also tax and give a credit for the foreign taxes. In countries with generous tax thresholds for rental income, it often is the case that the South African tax exceeds the foreign tax on the rental income.

Foreign funding from discretionary family structures

South Africa has complex rules governing the taxation of awards to South African beneficiaries of foreign family structures. To determine the tax, a South African exercise is required to categorise the retained funds in the structure in accordance with South African tax principles. Awards must be allocated to a specific category of such retained funds. Although the process to categorise the retained funds could be onerous, the result is often that tax efficient funding can be made from foreign structures to South African tax resident beneficiaries. Planning before arrival in South Africa is often critical to achieve the tax efficiency in this regard.

Transfer of wealth during lifetime or at death

Donations tax and estate duty are wealth taxes levied under South African tax legislation. Donations/gift tax is levied at 20% – 25% on donations made by tax residents. Estate duty is raised at similar rates upon the death of a person who is ordinarily resident in South Africa at the date of death.

Assets forming part of investment structures may be included in a resident’s estate if the deceased was competent to dispose of them immediately before death. This rule is surprisingly wide and careful consideration should be given to a resident’s powers over assets in structures, such as powers typically reserved for settlors or protectors, in order to avoid unexpected onerous estate duty consequences in South Africa.

Donations between spouses are generally exempt. However, following a recent change to South African tax legislation, donations to a non-resident spouse no longer qualify for the exemption. A similar estate duty spousal exemption applies, irrespective of whether the surviving spouse is tax resident in South Africa.

Exemptions from the donations tax and estate duty may also apply to foreign assets acquired before first becoming “ordinarily resident” and those received by inheritance or donation from non-residents, provided they are retained offshore. If an asset is subject to both estate duty and foreign death duty, a local rebate or relief in terms of an estate duty treaty is likely to apply to avoid double taxation.

Exchange control

Tax residence and exchange control residence are distinct, but closely connected and often considered together. If an individual becomes exchange control resident, exchange control rules may affect the movement of funds into and out of South Africa. There will also be disclosure obligations upon becoming exchange control resident, particularly where obtaining residence results in a loop structure. Accordingly, exchange control advice should be sought as part of broader relocation planning.

Plan before you become resident

The tax implications of becoming South African tax resident are manageable and, in certain instances, allow for tax efficiency, but should be considered early. Proactive advice can help to avoid unexpected tax leakage, preserve flexibility, and ensure that offshore wealth structures remain appropriate once South African tax residence becomes relevant.

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Introduction

On 7 August 2026 a draft Bill, the Regulation of Trusts Bill, 2026 (the Bill) was published for comment. It is intended to replace the Trust Property Control Act, 1988 (the Act), which will be repealed upon promulgation of the new legislation.

The Act was intended to regulate to some degree the administration of trusts and ALSO trustees’ obligations, but generally it can be said that this regulation was administered with a light touch.

The Act was amended a few years ago to “beef up” the legislation relating to beneficial ownership and anti-money laundering and terror financing, as part and parcel of the effort to have South Africa removed from the Financial Action Task Force’s grey list. The Bill retains the provisions and, in fact, expands their scope, once again with an eye to ensuring that South Africa is not grey-listed again.

In addition, however, a number of other changes have been made, a number of them being administrative. It is not my intention to embark upon a detailed analysis of the Bill. Rather, I wish to highlight some issues that affect trusts in general, and the issues that affect trustees of trusts, including family trusts. It will be noted, however, that the Bill (as does the Act) applies to all trusts, including testamentary trusts, trusts constituted as public benefit organisations and employee share incentive trusts.

Beneficial ownership

The definition of “beneficial owner” is essentially the same as that in the Act. The expression “beneficial owner” is well-known in South Africa and generally connotes the situation where a person holds shares as nominee for another, whereas the other enjoys all the rights and benefits of those shares. The definition used in the Bill, in line with international trends, goes far beyond something that connotes actual ownership, but, as stated, is in common use internationally.

What is a little troubling, though, is that paragraph (a) of the definition refers to “a natural person who directly or indirectly ultimately owns the relevant trust property”. To suggest that a person other than a trustee of a trust owns the trust property is effectively to deny the very existence of a trust. Save in circumstances where the trust might be considered a sham, the founder/donor/settlor and the beneficiaries could never be seen as owning the trust property. Only the trustees would ever legally own the trust property albeit for the benefit of the beneficiaries.

Independent trustee

Following a decision of the Supreme Court of Appeal where it was indicated (albeit as a obiter dictum) that it would be desirable for every trust to have an independent trustee who is knowledgeable about business and can guide the other trustees in this regard, the Master of the High Court (the Master) issued a directive that new trusts should have at least one independent trustee, and the expression was defined in the directive for that purpose.

The requirement to have an independent trustee is now included in the Bill, and what constitutes such a trustee is also spelled out.

Thus an independent trustee is a person who:

• is not related to the founder of the trust or to any other trustee;
• accepts office as a trustee in order to ensure that the trust is administered properly and in accordance with the trust deed; and
• has no personal interest in the trust property and is able to exercise independent judgment in overseeing the administration of the trust.

Clause 2 of the Bill indicates when a person is related to another person, and this is where the two people are:

• married, or live together in a relationship similar to a marriage; or
• separated by not more than two degrees of natural or adopted consanguinity or affinity.

Two degrees of consanguinity (related by blood) would include a person’s parents and grandparents, children and grandchildren as well as siblings.

Persons related by affinity would include (apart from the spouse) the spouse’s parents, i.e. parents-in-law, the spouse’s siblings, as well as a stepchild of the person, i.e. a child of the spouse from a previous marriage.

Somewhat strangely there is no obligation for every trust to have an independent trustee. The requirement to have an independent trustee is limited to the situation where, because of the relevant special circumstances, the Master has to appoint a trustee, who will be an independent trustee. Nevertheless, it is Werksmans’s practice to include such a person in all of the trust deeds that we draft for clients.

However, one of the occasions on which the Master may well appoint an independent trustee is if:

• all of the trustees are beneficiaries of the trust;
• all of the trustees are related to one another; and
• the trust carries on business or trading activities with third parties that give rise to obligations to such third parties,

the purpose being to ensure the separation of control and enjoyment of the trust property. Before appointing an independent trustee in these circumstances, however, the Master must consult the trustees and any beneficiaries who have vested rights in the trust property.

Lodging the trust deed

It has always been a requirement to lodge a copy of the trust deed with the Master. Moreover, in terms of the Act a trustee is prohibited from acting until the trustee has been issued with the Letters of Authority from the Master. And when this applies to the original trustees of a new trust, it is clear that the trust cannot operate until the trustees have received their Letters (despite the use of the plural the authority to all of the trustees is contained in a single document).

As is well-known, there have been huge problems in the various offices of the Master that have caused delays in processing documents, including obtaining Letters of Authority (though I understand that the situation is improving in some of the offices of the Master). The Bill retains the obligation to lodge the trust deed, but now it is possible to lodge it electronically and, unlike in the past, there is a prescribed fee to be paid.

As before, amendments must be lodged, but now a prescribed fee is also payable. Importantly, any amendment to the trust deed may only be lodged if the prescribed information relating to beneficial owners of the trust is up to date.

A major change relating to an amendment to a trust deed relates to the date upon which it becomes effective. Currently an amendment becomes effective upon signature, regardless of when, or even whether, the amendment is lodged with the Master. This is unlike the case with a company where, for example, certain special resolutions would not be effective until filed with the CIPC, or even approved by it.  Under the Bill it is proposed that a trustee may not act in relation to amendments to the trust deed before it is lodged with the Master and the Master has acknowledged lodgement thereof. What is more, any actions performed by the trustees in contravention of this requirement are invalid.

Risk assessment

A new feature in the Bill is the obligation by the Chief Master to ensure that a risk assessment is carried out in order to identify and assess the domestic and international money laundering and terror financing risks to which trusts are exposed.

This risk assessment must be reviewed every three years and also following any significant event or development that materially affects the risks to which trusts are exposed.

To be clear, it is not each trust that is subject to the risk assessment, but trusts generally and also to identify categories of trusts where risks have changed.

Associated with this is the obligation by trustees to establish and record beneficial ownership of the trust and lodge a register with prescribed information with the Master.  This must be updated within ten days of any change, which creates a compliance obligation for all trusts.

General powers of trustees

There are very few common law powers that trustees have, and generally the trustees’ powers are those that are specified in the relevant trust deed. Any power exercised that is not authorised in the trust deed is ultra vires and is void in law.

Clause 14 of the Bill endows extremely wide powers to trustees in that, subject to the provisions of the trust deed, trustees have the power of an absolute owner that are necessary to administer and dispose of trust property and to achieve the objects of the trust.

It would probably be wise for trust deeds to be amended to ensure that the provisions of clause 14 will apply to the extent that there is no conflicting provision in the trust deed itself, thereby ensuring that if any power has not been covered in the list contained in the trust deed, the trustees will nevertheless have that power if it is one that is necessary to administer and dispose of the trust property and to achieve the trust’s objects.

Investments by trustees

Another innovation is clause 16 which, in general, requires that trustees, when exercising any power to invest in trust assets, must invest in the form of assets or securities “in which a prudent investor might invest”.

Without limiting these factors, the clause sets out a laundry list of fifteen matters that trustees must have regard to, which includes circumstances such as the desirability of diversifying investments, the necessity to maintain the real value of capital or income, risk of capital depreciation and potential for capital appreciation, likely income returns, liquidity and marketability of the proposed investment, the effect of the proposed investment in relation to the tax liability of the trust, the costs of investing, including commissions and fees, as well as the trust’s overall investment strategy.

Annual financial statements

Another innovation is the requirement for trusts to prepare annual financial statements each year. If, prior to the Bill becoming an Act of Parliament annual financial statements were not being prepared, the trust must commence preparing them.

The Master has the right to require that the financial statements be submitted to the Master. It is noteworthy that no audit is required (though the trust deed may require this).

In addition, the trust must file an annual return in the prescribed manner and upon payment of a prescribed fee, which return must contain prescribed information. This return must be submitted within six months after the anniversary of the date on which the first trustee was authorised, or where the trust is already in existence, within six months of the commencement of the new legislation, and thereafter annually. So this is a further increase in the compliance obligations of the trustees.

There are also fairly stringent document retention rules.

Resignation of trustees

While the law currently requires that trustees may resign by notice in writing to the Master and ascertained beneficiaries who have legal capacity, the requirements are extended in that:

• the Master must give written acknowledgment of receipt of the resignation;
• the Master must be provided with proof that the other trustees and beneficiaries with a vested right have been informed of the resignation; and
• there is a provision to the effect that a trustee’s resignation only becomes effective when he or she receives the Master’s written acknowledgement.

The Bill also makes it clear that trustees who have resigned may be held liable for their failure to discharge their fiduciary duties as trustees during their period of trusteeship.

Termination of the trust

Currently it is necessary to advise the Master of the termination of a trust but, legally, the trust terminates when it terminates in accordance with the provisions of the trust deed.

A new requirement is that the trust terminates as of the date its name is removed from the trusts register (though, strangely, nowhere in the Bill does it require the establishment of a trust register).

Administrative fines, offences and penalties

The range and extent of prescribed offences and penalties have been expanded from what is currently the situation.

Conclusion

Obviously, there is likelihood of the text of the Bill being amended following submissions and presentations, but, as in most cases, the vast majority of the provisions in the Bill will find their way into the final legislation passed by parliament.

It is also evident that, while there have been some administrative improvements, the duties and burdens of trustees have been extended, as have the requirements to comply both with the law and trust deed itself.

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