Big changes for foreigners who own property in South Africa
The 2026 national budget introduced several tax adjustments that have direct implications for foreign nationals who own property in South Africa.
This is the feedback from Nicolas Botha, Tax Team Compliance and Processing Manager at Tax Consulting South Africa.
Botha said the changes affect a range of areas, including rental income thresholds, capital gains tax (CGT) and VAT rules.
all of which could alter both the tax bill and compliance requirements for overseas investors in the local property market.
“From my perspective, we look at what a foreign national typically generates in South Africa,” said Botha.
“For me, the tax brackets being adjusted for inflationary changes for the first time in three years was quite vital.”
He explained that the adjustment affects the tax-free threshold applicable to rental income earned in South Africa.
He noted that the law includes a R30,000 threshold for rental income in the filing requirements. As a result, even if a foreign owner’s income does not generate a tax liability, they may still be required to file with the South African Revenue Service.
Another significant change highlighted in the budget relates to capital gains tax. Botha said the annual CGT exclusion has increased from R40,000 to R50,000.
He added that the increase provides additional relief when foreign investors dispose of property.
“When we look at it now, you’ve got a tax-free portion of R297,500 on the gain if that’s your only income for the year of assessment,” he explained.
The budget also raised the primary residence exclusion to R3 million, but Botha warned that this benefit can be complicated for foreign owners to use.
“Basically, what it means is that if it is seen as your primary residence—the place that you would ordinarily reside in — you can then exclude the capital gain by R3 million,” he said.
Tax benefits if you have a partner
However, this definition is closely linked to South Africa’s tax residency tests, which can create risks for non-residents.
He added that the distinction between “ordinarily reside” and “ordinarily resident” can create a complex legal line that requires careful tax planning.
Another change in the budget is the increase in the VAT registration threshold from R1 million to R2.3 million.
While this may benefit smaller investors, Botha said it could create disadvantages for wealthier foreign property buyers.
“For your ordinary investor that’s buying a house occasionally, you’re not going to get to the R2.3 million threshold, so it’s a very good saving for them,” he said.
However, higher-value investors may face complications. “Foreign nationals tend to have euros and then buy more affluent properties. They might buy a property that is already VAT-registered,” Botha explained.
“If they no longer intend to rent it out and perhaps they’re going to use it as a holiday home, they won’t be able to claim back input VAT. That’s where there’s a loss on typically your higher investors.”
Botha also noted that many foreign property owners hold property jointly with a spouse or partner, which can provide tax benefits.
“Countries tend to have joint filings for spouses, whereas South Africa works on an individual basis,” he said.
“Both would file, which means that income can be split 50/50 between you and your spouse.”
This can effectively double certain tax benefits. “If we look at the rebate threshold, you’ve got R99,000 tax-free, which with a spouse jumps to R198,000 tax-free,” he said.
“The capital exclusion would normally be R297,500, which both of you would then get the benefit of.” As a result, Botha said it is often advisable for foreign nationals to hold property jointly.
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