Treasury targets tax-free transfers to non-resident spouses under proposed amendments contained in the 2026 Draft Taxation Laws Amendment Bill (TLAB), a move that could significantly impact South African couples with cross-border financial arrangements. The proposed changes by the National Treasury seek to close what it describes as a loophole that allows married couples to transfer substantial wealth offshore without paying donations tax.

If approved, the amendment will prevent South African tax residents from making unlimited tax-free donations to spouses who are no longer South African tax residents. The proposal forms part of broader National Treasury tax changes designed to strengthen the country’s tax base and reduce offshore tax avoidance.

National Treasury tax changes target offshore asset transfers

The proposed amendments introduced in the Draft Taxation Laws Amendment Bill are aimed at limiting the inter-spousal donations tax exemption where the receiving spouse is classified as a non-resident for South African tax purposes.

Currently, Section 56(1)(b) of the Income Tax Act allows legally married spouses to transfer money, investments, property, and other assets to one another without attracting donations tax.

Treasury argues that this exemption has been used by some wealthy couples to transfer significant assets offshore tax-free after one spouse emigrates.

According to the National Treasury:

“This avoidance arrangement enables the tax-free transfer of wealth offshore, undermining the policy intent of both the inter-spousal exemption and the Capital Gains Tax regime, and resulting in an erosion of the South African tax base.”

The proposed amendment would maintain the exemption only when the recipient spouse remains a South African tax resident.

What the donations tax exemption currently allows

Donations tax exemption between spouses

South Africa’s donations tax exemption has long provided married couples with the ability to transfer assets between one another without incurring donations tax.

Unlike ordinary gifts that may attract donations tax of:

• 20% on cumulative donations up to R30 million
• 25% on donations exceeding R30 million

inter-spousal transfers have traditionally enjoyed an unlimited exemption.

This rule has often been used for estate planning, family financial management, and restructuring jointly owned assets.

However, under the proposed law, this exemption would no longer apply where the recipient spouse is a non-resident for tax purposes.

Non-resident spouse tax proposal explained

How the non-resident spouse tax would work

The proposed non-resident spouse tax rule introduces a residency requirement for claiming the inter-spousal exemption.

If one spouse remains a South African tax resident while the other has already become a non-resident, any donation between them could become subject to:

• Donations Tax at 20% on cumulative donations up to R30 million.
• Donations Tax at 25% on amounts exceeding R30 million.
• Possible Capital Gains Tax (CGT) obligations.

The proposal is intended to discourage wealthy taxpayers from transferring large amounts of wealth offshore simply because one spouse has already emigrated.

Treasury says the change is not designed to penalise emigration itself but to prevent tax-free offshore wealth transfers.

Draft Taxation Laws Amendment Bill closes perceived loophole

Why Treasury believes the loophole exists

The Draft Taxation Laws Amendment Bill argues that current legislation unintentionally creates opportunities for taxpayers to avoid taxes when transferring assets to spouses who are no longer South African tax residents.

Treasury believes this undermines both the donations tax system and the Capital Gains Tax framework.

The proposal would therefore amend Sections 56(1)(a) and 56(1)(b) of the Income Tax Act by making South African tax residency a requirement for the exemption.

The draft legislation is expected to take effect retrospectively from 25 February 2026 if passed.

Public comments on the bill remain open until 28 August 2026.

Tax Consulting SA disputes Treasury’s reasoning

While supporting efforts to strengthen tax compliance, Tax Consulting SA argues that Treasury’s justification is only partially correct.

According to the firm, the government suggests couples currently avoid Capital Gains Tax entirely when transferring assets to non-resident spouses.

Tax Consulting SA says this is inaccurate because Section 9HB of the Income Tax Act already requires Capital Gains Tax to be triggered under certain circumstances.

The firm explains that the two tax provisions perform different functions.

• Section 9HB determines whether Capital Gains Tax applies.
• Section 56 determines whether Donations Tax applies.

If the proposed amendment becomes law, taxpayers could potentially become liable for both taxes simultaneously.

This would substantially increase the tax burden associated with transferring assets to a non-resident spouse.

South Africa cross-border tax implications for emigrating couples

Couples leaving South Africa at different times

One of the major concerns raised by tax professionals involves couples who emigrate separately.

In many cases, one spouse relocates abroad first to secure employment while the other remains in South Africa to manage:

• Property sales
• Family affairs
• Business interests
• School arrangements
• Financial administration

Tax Consulting SA notes that this is a common and practical reality for emigrating families.

The proposed South Africa cross-border tax amendment could affect these couples even when there is no intention to avoid tax.

Rather than prohibiting staggered emigration, Treasury wants to prevent substantial tax-free asset transfers once one spouse has already become a non-resident.

Six recommendations for affected taxpayers

Tax Consulting SA has advised couples with international financial arrangements to begin preparing early.

The firm recommends the following:

Confirm tax residency status

Each spouse should determine their exact South African tax residency position under domestic legislation and any applicable Double Tax Agreements.

Review transfers from 25 February 2026

Couples should assess all transfers made after the proposed effective date, including:

• Property
• Investment portfolios
• Shares
• Loan waivers
• Funding arrangements
• Other gratuitous asset transfers

Analyse each tax separately

Taxpayers should independently evaluate:

• Donations Tax
• Capital Gains Tax
• Exit tax implications

rather than assuming one tax determines the other.

Preserve documentation

Maintain detailed records including:

• Market valuations
• Transfer agreements
• Residency status
• Commercial reasons
• Estate planning objectives

Avoid rushed transactions

Last-minute transfers designed primarily to avoid tax could receive closer scrutiny from the South African Revenue Service (SARS).

Prepare for compliance

If enacted, affected taxpayers should plan for:

• Tax declarations
• Payment deadlines
• Cash flow requirements
• Possible SARS enquiries

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What happens next?

The proposed amendments remain in draft form and have not yet become law.

Stakeholders, tax practitioners, and members of the public have until 28 August 2026 to submit comments before Parliament considers the legislation.

Should the proposal be enacted without significant amendments, it would represent one of the most important National Treasury tax changes affecting married couples with international financial arrangements.

The proposed Treasury targets tax-free transfers to non-resident spouses reforms highlight South Africa’s increasing focus on tightening South Africa cross-border tax rules, closing offshore tax loopholes, and ensuring that wealth transfers involving non-resident spouses are subject to appropriate taxation. Couples with overseas assets or future emigration plans are encouraged to seek professional tax advice well before making significant financial transfers.