Big Changes for Foreign Property Owners: What the 2026 Budget Means for Your Tax Bill

The 2026 national budget introduced several tax adjustments that have direct implications for foreign nationals who own property in South Africa.

According to Nicolas Botha, Tax Team Compliance and Processing Manager at Tax Consulting South Africa, the changes affect rental income thresholds, capital gains tax (CGT), and VAT rulesall of which could alter both the tax bill and compliance requirements for overseas investors.

Rental Income Thresholds

Botha noted that the tax brackets were adjusted for inflationary changes for the first time in three years.

The law includes a R30,000 threshold for rental income in filing requirements. Even if a foreign owner’s income does not generate a tax liability, they may still be required to file with SARS.

Capital Gains Tax

The annual CGT exclusion has increased from R40,000 to R50,000.

“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,” Botha explained.

The budget also raised the primary residence exclusion to R3 million , but Botha warned this benefit can be complicated for foreign owners.

“Basically, what it means is that if it is seen as your primary residencethe place that you would ordinarily reside inyou can then exclude the capital gain by R3 million.”

However, this definition is closely linked to South Africa’s tax residency tests, which can create risks for non-residents.

VAT Registration Threshold

The VAT registration threshold has increased from R1 million to R2.3 million .

“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,” Botha said.

But 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. 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.”

Joint Ownership Benefits

Many foreign property owners hold property jointly with a spouse or partner, which can provide significant tax benefits.

“Countries tend to have joint filings for spouses, whereas South Africa works on an individual basis. Both would file, which means that income can be split 50/50 between you and your spouse.”

This can effectively double certain tax benefits:

• Tax-free rebate: R99,000 individually → R198,000 for a couple

• Capital exclusion: R297,500 individually → R595,000 for a couple

“It is often advisable for foreign nationals to hold property jointly,” Botha said.

The Bottom Line

The 2026 budget brings both relief and complexity for foreign property owners.

• Lower-value investors benefit from higher VAT and CGT thresholds.

• Higher-value investors may face input VAT losses.

• Joint ownership can double tax benefits.

• Primary residence exclusion requires careful tax planning.

Foreign property owners should review their structures with a tax professionalespecially those with high-value properties or plans to sell.

{Source: BusinessTech}

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