The 2026 National Budget introduces several updates that directly affect foreign nationals who own, or are considering buying or selling, property in South Africa.
While the changes are not dramatic, they do influence how rental income is taxed, how profits are calculated on sale, and how property investments should be structured over time.
Rental Income: Higher Threshold, Same Rules
Rental income earned from property in South Africa is taxed locally, regardless of where the owner resides.
From March 2026, the tax-free threshold for individuals under 65 has increased from R95,750 to R99,000 per year. Where a property is jointly owned, rental income is split between owners, effectively allowing a combined tax-free threshold of R198,000 per year before income tax becomes payable.
It is important to understand that tax is applied to net profit, not total rental income. This means that costs such as bond interest, levies, municipal charges, insurance and maintenance are deducted before tax is calculated.
In simple terms, what matters is not what the property earns, but what it produces after costs. Foreign owners should also ensure they are correctly registered as non-resident taxpayers, as incorrect classification could expose them to tax on worldwide income.
Capital Gains Tax: Increased Exclusion
When a foreign owner sells a property in South Africa, capital gains tax applies to any profit made.
The annual exclusion has increased from R40,000 to R50,000. In practical terms, this means that a seller can realise a profit of up to approximately R297,500 without paying tax on it, assuming there is no other taxable income in South Africa.
Where a property is jointly owned, the gain is split between the parties, effectively increasing the available tax-free portion.
When calculating the taxable gain, costs incurred in acquiring, improving and selling the property can be deducted. This includes legal fees, agent commission and qualifying improvements, all of which can materially reduce the final tax payable.
Primary Residence Exclusion: Now R3 Million
The primary residence capital gains exclusion has increased from R2 million to R3 million.
For foreign nationals, however, this exemption is not automatically applicable. It depends on whether the property qualifies as an ordinary residence, which introduces broader considerations around tax residency and usage.
Incorrectly applying this exemption can lead to unintended consequences, so it requires careful consideration. Where a property is jointly owned, the R3 million exclusion is shared between the parties, rather than applied individually.
VAT Threshold: Increased to R2.3 Million
The VAT registration threshold has increased from R1 million to R2.3 million, effective 1 April 2026.
For some investors, this reduces administrative complexity and ongoing compliance requirements. However, it also means that if an investor is not VAT-registered, they cannot claim input VAT on property acquisitions, renovations or operating expenses.
In higher-value transactions, particularly in commercial property, this can have a direct impact on overall returns and should be considered carefully.
Compliance: Still Required
A common misconception is that if no tax is payable, no filing is required. This is not the case.
Foreign property owners may still be required to register with SARS, submit provisional tax returns in August and February, and file an annual income tax return.
Rental income is generally classified under provisional tax, unless it falls below R30,000 per year. Failure to comply can result in penalties and interest, even where the final tax liability is minimal or nil.
The Agency Perspective
We continue to see consistent demand from international buyers, particularly in Cape Town’s lifestyle-driven markets.
What has shifted is the level of understanding. Buyers are increasingly focused not only on the purchase itself, but on how the property performs over time, how it is structured, and how it will ultimately be sold.
The 2026 Budget does not change the fundamentals of the market, but it reinforces the importance of getting these elements right from the outset.
