South Africans with non-resident spouses face major tax change

South African couples could face a significant tax change when one spouse is no longer a South African tax resident, with the National Treasury proposing to limit the long-standing donations tax exemption between spouses.

The proposed amendment is contained in the 2026 Draft Taxation Laws Amendment Bill (TLAB), which was published by the National Treasury for public comment on 30 July 2026.

It targets arrangements where spouses deliberately stagger their cessation of tax residence to avoid donations and capital gains tax.

Under the current rules, donations between spouses are exempt from donations tax, regardless of whether the recipient spouse is a South African tax resident.

The proposed amendment would change this by limiting the exemption to donations made by a spouse who is a South African tax resident.

This is according to Tax Consulting South Africa’s Team Lead of Expatriate Tax, John-Paul Fraser, and Head of Tax Controversy & Dispute Resolution, André Daniels.

They told Daily Investor that the change is aimed at arrangements involving the deliberate staggering of tax emigration by spouses.

“National Treasury has identified a practice whereby spouses deliberately stagger their cessation of tax residence,” they said.

Under these arrangements, one spouse ceases to be a South African tax resident, and the remaining resident spouse then donates assets to the non-resident spouse under the inter-spousal exemption.

Treasury’s concern is that these arrangements may facilitate the transfer of wealth outside the South African tax net without donations tax consequences.

In some circumstances, it may result in deferred capital gains tax consequences under the inter-spousal rollover provisions. The result is a perceived erosion of the South African tax base.

While the draft legislation proposes some significant changes, Fraser and Daniels clarified that it remains subject to the legislative process and public consultation.

What is changing?

Clause 17 of the 2026 Draft TLAB proposes that the inter-spousal donations tax exemption will only apply if the recipient spouse is a resident.

The amended section 56(1) will provide that the exemption applies to donations made to the spouse of the donor, “if that spouse is a resident”.

The proposed amendment is deemed to have come into operation on 25 February 2026 and applies to donations made on or after that date.

This means expatriates who have ceased South African tax residence but whose spouses remain resident could be directly affected.

A resident spouse would no longer be able to donate assets to a non-resident spouse free of donations tax, Fraser and Daniels explained.

Couples planning staggered emigration could also be affected, as the deliberate sequencing of one spouse emigrating first, followed by inter-spousal asset transfers, is now directly targeted.

Under the new rules, donations tax could become payable. If the recipient spouse is a non-resident, the unlimited inter-spousal exemption would fall away under the proposed amendment.

Donations could instead be subject to the existing donations tax regime, including the annual exemption for individuals, with tax levied at 20% on cumulative donations up to R30 million and 25% on amounts above that threshold.

For high-net-worth individuals with cross-border family structures, this could result in a substantial tax liability when transferring wealth to a non-resident spouse.

Fraser and Daniels said the change is particularly relevant to couples who have structured their affairs around staggered tax emigration.

“Couples who have already executed such donations in reliance on the previous exemption face immediate exposure,” they said.

They said affected taxpayers should obtain a formal tax residency determination for both spouses as of the date of any planned donation.

The definition of “resident” in section 1 of the Income Tax Act, including the ordinarily resident test and the physical presence test, must be carefully applied.

The proposed donations tax amendment is accompanied by a change to the capital gains tax rules, Fraser and Daniels noted.

New subsection 9HB(6) would provide that the inter-spousal CGT rollover does not apply to disposals to a non-resident spouse, unless the asset remains within the South African tax net.

The proposed exclusions include South African immovable property and assets of a permanent establishment. This CGT amendment is set to come into operation on 1 March 2027.

What taxpayers should do

The proposed amendment is particularly important for South Africans who have already transferred assets to a non-resident spouse since 25 February 2026, Fraser and Daniels warned.

Affected taxpayers should establish the tax residency status of both spouses at the time of the donation and determine whether the transfer could create a donations tax liability.

Couples planning to transfer assets should also consider the proposed CGT changes that will take effect from 1 March 2027.

Fraser and Daniels said taxpayers should not assume that existing estate planning structures will continue to provide the same tax treatment.

They also warned that taxpayers should consider both the eventual commencement date and any changes that may arise during the legislative process before implementation.

To navigate the CGT changes, they encouraged taxpayers to reassess their estate planning structures where assets were intended to be transferred to a non-resident spouse.

“Where assets were intended to be transferred to a non-resident spouse, existing estate planning and cross-border wealth transfer strategies should be revisited,” they said.

Depending on the facts, alternatives may include market-value disposals, trust structures, or other succession planning mechanisms.

The tax consequences of each alternative, including donations tax, CGT, exchange control and foreign tax implications, should be evaluated before implementation.

The proposed amendment forms part of a broader move by the National Treasury to close emigration-related loopholes and strengthen oversight of cross-border wealth transfers.

Fraser and Daniels said the changes reveal several clear policy directions. “First, the closing of emigration-related loopholes is accelerating,” they said.

They explained that the donations tax and CGT amendments are a direct response to the practice of “staggered emigration”.

It also signals that the National Treasury will not tolerate arrangements designed to strip assets from the South African tax base under the guise of inter-spousal transfers.

The proposed amendment does not abolish the inter-spousal donations tax exemption altogether. Instead, it introduces a residency requirement for the spouse receiving the donation.

For South Africans with international family structures, the key issue will therefore be whether the recipient spouse remains a South African tax resident at the time the donation is made.

Fraser and Daniels said taxpayers should proactively review their estate planning and cross-border wealth transfer arrangements rather than waiting for the legislation to be finalised.

“The taxpayer at large should not simply assume the amendment will automatically reduce their liability,” they explained.