News | May 20, 2021

Taxation around Foreign Pensions – Judge Dennis Davis

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On the 15th of May 2021, News24 issued a press release focusing on Honourable Judge Dennis Davis’s (JDD) speech at the Glacier International Webinar, where he spoke about taxation around foreign pensions. In case you missed it, we have provided a summary below.

In short, JDD confirmed that the Davis Tax Committee (DTC) has made no recommendations in respect of international pensions to SARS or the Treasury Select Committee and that there are no specific measures being taken by SARS to investigate international pensions. 

However, he points out that the foreign pension must be legitimate and alludes to what is meant by this, i.e., they must invest in the kind of investments one would typically see in a pension fund, and it should be structured and used as a pension fund.

He warns against the use of a foreign pension, where their use is to disguise ‘something else’. Or as he mentioned in the 2016 DTC Estate Duty Report, the pension must not ‘represent a concealment of the true arrangement between the SA taxpayer and the retirement fund.’ In short, the pension must not be a front for some other affair where the aim is to unfairly erode the tax base.

He also comments on the need to have funded offshore structures through legitimate means and that South African Exchange Controls must have been complied with when externalising funds which would include contributions to an offshore pension.

Furthermore, he identifies the legitimate need for South Africans to externalise their funds to hedge against Rand devaluation and gain exposure to stock markets outside of the JSE to which offshore pensions cater.

Lastly, he said, ‘…if you have a reliable one [offshore pension] which will give you good returns, be my guest, but it has to be a genuine structure.

Here is a link to the full article: https://www.news24.com/fin24/economy/sars-to-take-a-closer-look-at-bitcoin-taxi-owners-and-illegal-offshore-investments-20210515


Authored by

Rex Cowley
Co-Founder and Director, Overseas Trust and Pension


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