If you are a South African tax resident and you paid tax on income in another country, you may qualify for foreign tax credit relief under section 6quat. This relief helps prevent the same income from being taxed twice, but it only applies if the income is also taxable in South Africa and you meet the relevant conditions.
The starting point is always your South African tax residency status. If you are not a South African tax resident, the foreign tax credit rules may not apply in the same way.
Tax note: This article is general information for South African taxpayers. It is not tax, legal, or financial advice. Confirm current SARS guidance and speak to a registered tax practitioner before acting on complex facts.
Key Takeaways
- A foreign tax credit can reduce South African tax on income that was already taxed overseas.
- Section 6quat is the main relief rule for foreign tax paid on taxable income.
- Tax residency comes first. If you are not a South African tax resident, the analysis changes.
- The foreign employment income exemption is separate from the foreign tax credit.
- The credit cannot usually exceed the South African tax payable on the same income.
- Good records matter: keep proof of foreign tax paid, income earned, and your residency position.
What a foreign tax credit is in South Africa
A foreign tax credit is relief that helps prevent the same income from being taxed twice by two countries. In South Africa, this relief is generally linked to section 6quat of the Income Tax Act.
In simple terms, if you paid tax on income in a foreign country and that same income is also taxable in South Africa, SARS may allow a credit for the foreign tax paid. The credit is not automatic. It depends on the type of income, your tax residency, and whether South African tax applies to that income.
SARS also has a separate foreign employment income exemption for some employees working abroad. That exemption is not the same as a foreign tax credit. If income is exempt, there may be no South African tax on that income to offset with a credit. See SARS’s guidance on Foreign Employment Income Exemption.
Why tax residency comes first
South Africa taxes residents on worldwide income, subject to exemptions and relief rules. That means you usually need to know your residency status before you can decide whether foreign tax credit relief applies.
If you are still a South African tax resident, foreign income may still need to be declared in South Africa. If you are no longer resident for tax purposes, the foreign income rules can change significantly.
Being physically abroad does not automatically end your South African tax residency. If you are unsure about your status, read our guide to Ceasing Tax Residency in South Africa: What It Means and South African Expat Tax: What Residents Working Abroad Must Know.
How section 6quat relief usually works
Section 6quat relief is generally used where:
- the same income was taxed in another country,
- that income is also taxable in South Africa, and
- you are entitled to claim the foreign tax paid as a credit under South African rules.
The key limit is that the foreign tax credit cannot usually exceed the South African tax due on that same income. If the foreign tax paid is higher, the excess is not refunded through the South African return.
This is why the credit is best understood as a cap-limited relief mechanism, not a full reimbursement of foreign taxes paid.
Example 1: Foreign salary taxed abroad and in South Africa
Here is a simple illustrative example.
Situation
- You are a South African tax resident.
- You work overseas and earn salary income.
- The foreign country taxes your salary.
- The salary is also taxable in South Africa because you remain a resident.
- The foreign employment income exemption does not apply to the full amount, or the income falls outside the exemption conditions.
What happens
You may be able to claim foreign tax credit relief for the foreign tax already paid on that same salary.
Simple logic
- Foreign salary income is taxed abroad.
- South Africa also taxes that salary because you are a resident.
- You calculate the South African tax on that income.
- You then claim a credit for the foreign tax paid, but only up to the South African tax attributable to that income.
Why this matters
If the foreign tax is lower than the South African tax, the credit can reduce your South African tax bill. If the foreign tax is higher than the South African tax, the credit is usually capped at the South African tax on that income.
This is the basic double-tax relief principle discussed in sources such as TaxTim’s guide on foreign income tax for SA residents and PwC’s South Africa tax summary on foreign tax relief and tax treaties.
Example 2: Foreign tax paid on income above the exemption limit
Some South Africans working abroad rely on the foreign employment income exemption, but that exemption does not necessarily cover all foreign earnings.
Situation
- You are a South African tax resident.
- You work outside South Africa for part of the year.
- A portion of your foreign employment income is exempt under South African rules, but another portion is still taxable in South Africa.
- The foreign country taxed the full amount.
What happens
You cannot use a foreign tax credit against income that South Africa does not tax. The credit only matters for the part of the income that is still taxable in South Africa.
Practical result
- For the exempt portion: no South African tax is due, so there is usually no South African tax to offset with a credit.
- For the taxable portion: section 6quat relief may apply if foreign tax was paid on that same amount.
This is why it is important not to confuse the exemption with the credit. The exemption removes some income from South African tax. The credit reduces South African tax on income that remains taxable.
For more on the exemption side, see SARS’s page on Foreign Employment Income Exemption and SAIT’s overview of Your Foreign Income & SARS: What Every SA Tax Resident Must Know.
Example 3: When the credit is limited
A foreign tax credit does not automatically wipe out all South African tax.
Situation
- You are a South African tax resident.
- You earn foreign rental income, interest, or salary that is taxable in South Africa.
- You pay tax in the foreign country.
- The South African tax on that income is lower than the foreign tax paid.
What happens
SARS may allow a credit only up to the South African tax on that income. In other words, the foreign credit cannot usually exceed the South African tax liability for the same income.
Practical result
- If foreign tax paid is less than South African tax due: the credit may reduce your South African bill, but you may still owe SARS the balance.
- If foreign tax paid is more than South African tax due: the credit is limited to the South African amount attributable to that income.
This is the main reason people should not assume that paying tax overseas means they owe nothing in South Africa. The South African result depends on the type of income, residency, and the limits that apply to the credit.
What documents SARS may expect
If you claim foreign tax relief, keep records that support both the income and the foreign tax paid. SARS may expect documentation such as:
- foreign tax assessment notices
- payslips or income statements from the foreign employer
- proof of tax withheld or paid overseas
- foreign bank statements, where relevant
- employment contracts or assignment letters
- records showing the period you worked abroad
- documents supporting your South African residency position, if relevant
Keep these records organised for the tax year in which the income was earned. Good records help you explain how you calculated the foreign tax credit if SARS asks for support.
Common mistakes when claiming foreign tax relief
Here are mistakes that often cause confusion:
1. Assuming all foreign income is exempt
Some income may qualify for exemption, but not all foreign income does. Salary, rental income, interest, and dividends can be treated differently.
2. Claiming a credit without checking residency
If you are not a South African tax resident, the foreign tax credit question may not be the right starting point.
3. Confusing exemption with credit
An exemption removes income from tax. A credit reduces South African tax on income that remains taxable.
4. Claiming more than the South African tax due
The credit is limited. Foreign tax paid above the South African tax on the same income does not usually create extra relief.
5. Not keeping proof of foreign tax paid
Without documents, it becomes difficult to support the claim on your return.
If you are still unsure whether you remain resident, our article on Ceasing Tax Residency in South Africa: What It Means may help.
Foreign tax credit versus exemption versus double taxation relief
These terms are related, but they are not identical.
Foreign employment income exemption
This is a South African rule that can remove some foreign employment income from South African tax if the conditions are met.
Foreign tax credit
This is relief for foreign tax already paid on income that is also taxable in South Africa.
Double taxation relief
This is the broader idea that the same income should not be taxed twice without relief. In practice, relief can come from a treaty, an exemption, or a credit depending on the facts.
If you want a broader overview of treaty-based relief, see Double Taxation Agreements Explained for South Africans.
Frequently Asked Questions
What is a foreign tax credit in South Africa?
It is relief that may allow you to reduce South African tax by the amount of foreign tax already paid on the same taxable income, usually under section 6quat.
Can I claim foreign tax credit if I already paid tax overseas?
Yes, sometimes. You generally need to be a South African tax resident and the same income must also be taxable in South Africa. The credit is also limited to the South African tax on that income.
Does the foreign tax credit apply to salary, dividends, rental, or interest?
It can apply to foreign income that is taxable in South Africa and taxed abroad, but the result depends on the type of income and the facts of your case. Do not assume all foreign income qualifies in the same way.
What is the difference between a tax exemption and a tax credit?
An exemption removes income from tax. A credit reduces the South African tax payable on income that remains taxable.
Can a foreign tax credit reduce my tax to zero?
Yes, if the foreign tax credit is equal to or greater than the South African tax on that income, it may reduce the South African tax on that income to zero. It usually does not create a refund beyond that limit.
Conclusion
Foreign tax credit relief can help South Africans abroad avoid being taxed twice on the same income, but it only works if the residency position and income type support the claim. In practice, the key steps are to confirm whether you are still a South African tax resident, check whether the foreign employment income exemption applies, and then work out whether section 6quat relief is available.
If your situation involves foreign salary, rental income, or other overseas earnings, keep proper records and compare the South African tax on that income with the foreign tax already paid.