South Africa

A pension fund or provident fund is registered under the Pension Funds Act, which describes a fund as an association of persons, or a business carried on under a scheme or arrangement, set up to provide annuities or lump sums for members on retirement, or for their dependants on their death.¹ For its tax treatment it is also approved by the South African Revenue Service (SARS), which approves a private employer's fund only if its rules make membership throughout the period of employment a condition of employment for the classes of employees they name.² A fund may serve one employer or, as an umbrella fund, the employees of different employers.³ It may be defined benefit, or defined contribution, where a member's interest is at least the contributions paid by the member and the employer, with fund return.⁴ A provident fund follows the same annuity rule at retirement as a pension fund, with money a member had on 1 March 2021 protected, and all of it for a member then 55 or older.⁵

The employer pays the fund the member's contribution, deducted from pay under the fund's rules, and its own.⁶ Contributions are deductible up to 27.5% of the higher of remuneration or taxable income, at most R350,000 a year, with any excess carried forward;^7,8 the 2026 Budget would raise the cap to R430,000, in a Bill that was not law when checked, as the gifts section explains.⁹

Since 1 September 2024 each fund keeps three components for each member, the two-pot system. One-third of new contributions goes to a savings component, which the member may draw once in each tax year, at least R2,000 a time;^10,11 two-thirds go to a retirement component, which must buy an annuity at retirement unless it is small;¹² and money already in the fund stays in a vested component (South Africa's name for money in the fund before September 2024, not a U.S. vesting term) under the fund's old rules,¹³ less a one-off seed of 10%, at most R30,000, moved to the savings component.¹⁴ A member of a provident fund who was 55 or older on 1 March 2021 and is still in it stays outside the components unless they elected in.¹⁵

On leaving a job a member may take the vested component in cash where the fund's rules allow it,^13,16 draw the savings component as the two-pot rules allow, all of it if it is under R2,000,¹⁷ move the benefit to a new employer's fund, a preservation fund or a retirement annuity fund (RA), or leave it in the fund as a deferred pensioner.^18,19 A member who has not been resident for three uninterrupted years, or who left South Africa at the expiry of a work or visit visa, may take the retirement component in cash before retiring.^20,21 At retirement up to one-third of the vested component may be commuted for cash and the rest, with the retirement component, buys an annuity, unless together they come to R165,000 or less;^22,12 the fund may pay that annuity itself, buy it in its own name, or buy it in the member's name, which the annuity blocks below cover.²³

Not settled: a registered fund is a legal person that owns its assets. Cautious: a foreign trust.

Not settled, and no IRS guidance addresses South African funds. The argument that a registered fund is not a trust: on registration it becomes "a body corporate capable of suing and being sued in its corporate name",²⁴ and the Supreme Court of Appeal has held that a fund is a legal persona that owns its assets in the fullest sense.²⁵ The Act calls a fund an association of persons, and its members have the right to elect at least half the board,^1,26 which is the strongest point against a trust: a trust's beneficiaries are people who cannot share in the responsibility for its property.²⁷ The registrar may exempt an umbrella fund from member election,³ which weakens that point for it.

The argument that it is one: the IRS ruled privately that a foreign pension entity organized under its country's law was a trust, testing for associates and a business purpose together,^28,29 and on our reading a registered fund's object is retirement benefits, not business for profit, though the Act's definition also reaches a business carried on under a scheme to provide annuities.¹ That ruling's facts track South African law: an Act and a supervisor, mandatory participation, members who cannot assign their interests, and a transfer to the new employer's fund on a job change.^30,31,32 Here the board owes a fiduciary duty to members and beneficiaries,³³ no benefit can be assigned or attached,³⁴ and the Act switches the Trust Property Control Act off for registered funds.³⁵ IRS advice on Liechtenstein entities, which is not precedent, lists among a trust's elements a trustee with legal title and a duty to protect and conserve the assets for the beneficiaries.³⁶

A self-insuring defined benefit fund promises benefits and bears the risk, so it functionally issues annuities, and the Code treats insurance companies as corporations.³⁷ Defined benefit funds, and funds whose benefits an insurer underwrites, are the weakest cases for a trust.

With the question open and the penalty for a missing Form 3520-A large,³⁸ this guide takes the cautious course of reading a registered fund as a trust, as this site does for Swiss pension foundations and Dutch pension funds. Governed by South African law and run in South Africa, it meets neither test for a domestic trust, so it is foreign.^39,40 If it is not a trust, it is a foreign entity classified under the default rules,⁴¹ and Forms 3520 and 3520-A don't reach it.

Cautiously, a §402(b) employees' trust; contributions the rules require from your pay count as your employer's.

On the cautious reading this is a §402(b) employees' trust: an employer pays in for its employees,⁶ and the IRS has ruled privately that a foreign fund with mandatory employer contributions and personal accounts is one.⁴² A trust created outside the United States escapes §402(b) only if it would otherwise meet §401(a),^43,44 and on our reading nothing suggests a South African fund does. Employer contributions are U.S. income to you when paid, to the extent vested,^45,46 and the foreign earned income exclusion cannot cover them.⁴⁷ You are not treated as owner of the part they fund.⁴⁸ In a defined contribution fund your interest is at least the contributions paid by you and your employer, with fund return,⁴ so on our reading employer money vests as paid; in a defined benefit fund the employer's part for one member is worked out by actuarial methods.⁴⁹

Whose money it is. Contributions the rules take from your pay at the fund's scale, in a fund whose membership is a condition of your employment for as long as you are employed, count as your employer's, on the IRS Chief Counsel's reading of Singapore's fund, which is not precedent: a share withheld because membership requires it is not withheld at your election, and is not constructively received.^2,50 The strongest point against is South Africa's own wording: the Act calls that money a contribution deducted from the member's remuneration,⁶ and South African tax deems an employer's contribution, so far as it is taxed to you, to have been contributed by you.⁵¹ The first is a rule on how the employer pays the fund, and the second serves South Africa's deduction and fringe benefit tax; U.S. law asks who paid and whether at your election, and §402(b) itself taxes vested employer money to you as income.^45,52 This site reads the required shares of Hong Kong's, India's and Israel's funds the same way, and no IRS guidance addresses South Africa's wording.

Additional voluntary contributions are your own, and so is money above the required scale wherever the rules let you choose or change your rate, whatever the payslip calls it;^52,53 a one-time irrevocable choice of rate made when you join counts as your employer's.⁵⁴ Employees already working for the employer when the fund started or the employer joined may be permitted to join on application;⁵⁵ that joining was elective, so on the cautious course their contributions are their own unless the rules show they cannot leave while employed. Where the documents don't show which, this guide counts contributions as your own for the forms, the cautious course; on the employer's reading they are §402(b) income, which the foreign earned income exclusion cannot cover.⁴⁷ If you control the company that employs you, you decide what it pays in; no IRS guidance says whether that makes its contributions your own, so the cautious course counts them as your own for the forms, which brings Part II and Form 3520-A for the whole interest from the start.^56,57

Once your own contributions have come to exceed your employer's, counted from the first payment, you are treated as owner of the part your contributions fund, if the grantor trust rules are otherwise met.⁵⁶ §679 does not apply to a §402(b) trust,⁵⁸ so that means §677: met in a defined contribution fund, where the income is credited to your account,^59,4 and in a defined benefit fund not settled, so this guide keeps the cautious course. No contribution to a §402(b) trust is a Part I event, your own included.⁶⁰ Payouts from the employer's part are taxed under §72 when paid or made available, with what was already taxed to you as basis, and employer money that would not have been income if paid to you directly, but not contributions for work done, or earnings made, while you were a nonresident alien that no country taxed,^{61,62,63,64,65} and they stay off Part III if you report them as compensation income.^66,67

The savings component. An amount is made available, on the IRS Chief Counsel's reading of a similar fund, whenever you could receive it just by giving notice that you want it.⁶⁸ On the cautious course the savings component is made available whenever you could take it by applying: in each South African tax year until you make that year's one withdrawal, the whole savings balance once it reaches R2,000.¹¹ Money credited after that year's withdrawal is first made available on the next 1 March. Money you elect to move from the savings component into the retirement component is not made available after the move, but one-third of later contributions still goes to the savings component and is made available again under these rules.^69,10 The one-off seed could be worked out on or after 1 September 2024 and is backdated to that date,⁷⁰ so it is first made available when it is allocated and the balance reaches R2,000. The amount for a U.S. year is what is first made available in it, not the whole balance again each year,⁶¹ and a U.S. calendar year spans two South African tax years, so it can hold two windows. The points against: the one withdrawal a year and the R2,000 floor are set by statute, not by a trustee, and each withdrawal needs a SARS tax directive, the instruction SARS gives the fund on how much tax to withhold;^11,71,72 income is not constructively received if your control of it is subject to substantial limitations or restrictions,⁷³ and whether these are is not settled. SARS refuses a directive while you have outstanding returns,⁷⁴ which is within your control, so on our reading the directive is notice, not a restriction. Whether money made available and left in the fund then counts as your own money for Part II is not settled, no IRS guidance addresses it, and the cautious course does not add a Part II for it.⁵⁶

Leaving South Africa. Once you have not been resident for three uninterrupted years, or have left South Africa at the expiry of a work or visit visa, you may take the retirement component in cash on request,²⁰ and the vested component is yours to take on leaving the job where the fund's rules allow it.¹³ On the cautious course, as for Hong Kong's permanent departure, the retirement component is then made available in the year the facts that found the claim exist, whether you take it or not, and once you have also left the job the whole balance has been made available. What you count that year is only what is first made available in it, taxed above your basis: not savings counted in earlier years, and not a vested component already made available when you left the job.^68,61 If you are a U.S. citizen who worked in South Africa on a work visa, that year can be the year you leave. Whether a claim that needs a SARS directive and proof of non-residence, with a certificate of residence from your new country, is made available before you claim is not settled, and no IRS guidance addresses it.⁷⁵

If those facts, three years' non-residence or leaving at a visa's end, existed before you became a U.S. person, when that money was made available is not settled, and no IRS guidance addresses it. The argument against reporting it is that it was made available in a year before you were a U.S. person, so it was never U.S. income.⁶¹ The cautious course treats what you could then take as made available in your first year as a U.S. person, on Part III, taxed above your basis, and your basis leaves out contributions for work done, and earnings made, while you were a nonresident alien that no country taxed,^61,65 and what is credited to it later is made available as it is credited.⁶⁸ Whether money made available and left in the fund then counts as your own money for Part II is not settled, and the cautious course does not add a Part II for it.⁵⁶

Leaving a job and retiring. On leaving a job the vested component is yours to take in cash where the fund's rules allow it,^13,16 so on the cautious course it is made available that year, whether you take it, move it or leave it in the fund. The savings component stays on the two-pot timing above, and a balance under R2,000 can then be taken in full.¹⁷ At retirement the part you could commute, up to one-third of the vested component and the savings component, or all of it where the retirement component and two-thirds of the vested component together come to R165,000 or less, is made available too.^22,12 An annuity the fund pays itself or holds in its own name is taxed as each payment is paid,⁶¹ but where a trust distributes an annuity contract, a regulation counts the contract's entire value as the distribution, so an annuity bought in your name is a payout of its whole value that year.⁷⁶ Money made available and moved out in the same year goes on Part III once.⁷⁷

If you are a highly compensated employee and one reason the fund is not exempt is that it fails the U.S. coverage tests, you include your vested balance, less what has already been taxed to you, in income each year instead;⁷⁸ those tests leave out nonresident aliens with no U.S.-source earned income from the employer.⁷⁹

Rev. Proc. 2020-17 and the proposed rules: unlikely, as the savings component can be drawn once a year with no penalty.

Rev. Proc. 2020-17 exempts an eligible individual (one who has filed U.S. returns and reported the fund's income as U.S. law requires)⁸⁰ from Forms 3520 and 3520-A for a retirement trust that meets its conditions.⁸¹ A fund points toward three of them. It is tax-favored: its receipts and accruals are exempt and contributions are deductible.^82,83,84 SARS collects third-party data on pension contributions for each tax year, and every lump sum needs a SARS directive first, which on our reading meets the reporting condition.^85,86,87 Contributions follow employment, since membership is a condition of it.^2,88

Payouts must wait for retirement age, disability or death, or carry a penalty, and the examples of permitted early payouts are needs such as hardship, education and buying a home.^89,90 A savings withdrawal needs no reason, once each tax year, and is taxed at your ordinary rate,^11,91 and the vested component can be taken in cash on leaving a job where the fund's rules allow it,^13,16 so on our reading the condition is not met. Whether losing the tax-free first R550,000 of a retirement lump sum, against R27,500 for a withdrawal, is a penalty is not settled.⁹² The limit: contributions must be limited by a percentage of earned income or a dollar cap,⁹³ but South Africa limits the deduction, not contributions, and carries any excess forward,^7,8 so that one is open. And an employer's trust must cover a wide range of employees, rank and file included;⁹⁴ membership is compulsory for the classes the rules name, and the employer chooses the classes,² so that one turns on the fund. With no IRS guidance on South African funds, Rev. Proc. 2020-17 is unlikely to cover a fund with a savings component.

The proposed regulations, which you may rely on now if you apply them in full and consistently with related persons,⁹⁵ let a value test, US$600,000 adjusted for inflation from 2026, stand in for a contribution limit, on our reading adding together all your trusts in South Africa.⁹⁶ They keep the payout condition in the same words and the employer condition,^97,98 so they are unlikely too. A member outside the components, such as a provident fund member who was 55 or older on 1 March 2021 and did not elect in, still has the vested component's cash on leaving a job, so the payout condition stays open even there.^15,13

No deferral while you work in South Africa; Article 18(6) needs a competent authority agreement, and none is listed.

No deferral while you work in South Africa. The saving clause lets the United States tax its residents and citizens as if the treaty had not come into effect,⁹⁹ and it applies only one way, since South Africa chose not to have it apply to its own tax.¹⁰⁰ Article 18(6) defers U.S. tax on a plan's undistributed income for a participant in a South African plan who comes to work in the United States, and the saving clause spares it,^101,102 but only if contributions were made before the person arrived and the U.S. competent authority has agreed that the plan generally corresponds to a U.S. one,¹⁰³ and only while the person is present to work there.¹⁰⁴ The IRS's table of competent authority arrangements lists none on pensions for South Africa,¹⁰⁵ so this guide does not rely on it. Even a deferral would not remove Forms 3520 and 3520-A, as the IRS said of Canadian plans.¹⁰⁶

Payouts. Article 18(1) lets South Africa tax a pension paid to a U.S. resident only if the person worked there two years or more in the ten years before it first became due and ten years or more in all,¹⁰⁷ and the Technical Explanation names South Africa's pension and provident funds as the qualifying plans.¹⁰⁸ It also lets the State where the beneficiary lives tax the distribution,¹⁰⁹ and a pension's source is where the pensionable service was performed.¹¹⁰ The United States taxes a payout under its own rules either way and credits South African tax paid, subject to the limitations of U.S. law;¹¹¹ tax South Africa should not have charged is not a creditable tax,¹¹² and SARS lists form RST01 for a non-resident's relief from South African tax on a pension or savings withdrawal.¹¹³ On the cautious course the United States can tax an amount in the year it is made available, while South Africa taxes it when paid, so the two can fall in different years, and South African tax is credited subject to the limitations of U.S. law.¹¹¹ Disclosing a treaty position on Form 8833 is waived for pensions.¹¹⁴

A green card holder who is also resident in South Africa is placed in one country by the treaty's tie-breaker,¹¹⁵ and one placed in South Africa is not a U.S. resident for the treaty, so the saving clause, which reaches residents as Article 4 determines them, does not reach that person, though it still reaches a U.S. citizen.⁹⁹ Such a person can figure their U.S. tax as a nonresident, filing Form 1040-NR with Form 8833,¹¹⁶ but is still treated as a U.S. resident for other purposes,¹¹⁷ so the cautious course is to keep filing Forms 3520 and 3520-A unless you rely on the proposed regulations, which treat you as not a U.S. person for that time.^118,95 For a long-term resident, starting to be treated as resident abroad under a treaty, without waiving its benefits, ends lawful permanent residence for tax purposes, and that is an expatriation.^119,120

Part II and 3520-A once your own money passes your employer's; Part III for payouts, amounts made available and moves.

Read as a §402(b) trust: no Part I for any contribution, your own included.⁶⁰ No Part II or Form 3520-A for the employer-funded part, required contributions from your pay included; Part II and Form 3520-A can apply if your own money, voluntary contributions and rates you chose included, comes to exceed your employer's, and are then due each year for the part it funds.^48,56,121 No Part III for payouts from the employer-funded part that you report as compensation income.⁶⁶ Part III can apply if you receive a payout from a part you own, on lines 24 and 27,¹²² or, on the cautious course, if an amount is made available to you, unless you report it as compensation income: the savings component as the two-pot rules allow it, the rest of the balance after three years of non-residence or on leaving at the end of a work or visit visa (in your first year as a U.S. person, if that happened before you became one), and the cash you could take on leaving a job or at retirement, each counted once as made available; line 24 covers what you receive actually or constructively.^123,68 On that course the amount for a year is what is first made available in that year, not the whole balance again each year.⁶¹ Money counted as made available in an earlier year and paid out later goes on Part III when it is paid, with a statement naming the year it was counted, whether or not it went on Part III that year: the count was a constructive receipt and the payout is the actual one, and line 24 covers what you receive actually or constructively, whether or not it is taxable; what was taxed when it was made available is basis by then, not compensation income you report, so the compensation exception does not take it off.^123,124,66 On the cautious course, a payout that mixes that money with growth or other money taxed only when it is paid goes on Part III in full, the part you report as compensation income included, since the exception covers a distribution you report as compensation income and part of this one is not.^123,66 Part III can also apply, on the cautious course, to money moved out of the fund, as the practical notes say, and to a death benefit paid to you, as the next paragraph says.⁶⁶ No Form 4970, except as the death benefits paragraph says: payouts from a §402(b) trust are taxed under §72, not under the trust distribution rules, and the income of a part you own is taxed to you each year.^61,125,126 If the fund does not file Form 3520-A, you attach a substitute to your Form 3520.¹²⁷

Death benefits. A benefit payable on a member's death does not form part of the estate: the board pays it to dependants and nominees in the proportions it thinks equitable, and into the estate only if there is neither.¹²⁸ Paid straight to you as a U.S. dependant or nominee, it is a payout from a foreign trust on this reading, and since it is not settled whether an heir can report it as compensation income, the cautious course reports it on Part III;^77,66 it is not a bequest for Part IV. A minor's benefit may be paid in instalments the board decides, with interest, and the balance at majority,¹²⁹ and each instalment is then a payout on Part III as it is paid, on the same course. A payment to a trustee under the Trust Property Control Act, a guardian, or a beneficiary fund counts as a payment to the dependant or nominee.¹³⁰ Where a beneficiary fund or such a trust holds a U.S. child's benefit, how the child reports is not settled, and no IRS guidance addresses it; the child funded none of it, so, as for an heir's account in Israel's funds, the cautious course reports the money going in on Part III, and what later comes out of it too.⁷⁷ Whether the child is then owner is not settled, and the cautious course does not add a Part II; whether a payment can carry out income kept in earlier years, with Form 4970, is not settled either.¹³¹ A U.S. guardian who sets up such a trust is a grantor of it, but a person who creates a trust and puts none of their own money into it is not treated as owner of any part of it; a guardian who adds their own money makes a Part I transfer and can be owner of that part.^132,133,58 Paid into the estate, the benefit is part of what the heirs inherit. Whether what a U.S. heir of a member who was not a U.S. person then receives is a bequest from a foreign estate, on Part IV, or a distribution from the fund, on Part III, is not settled; the cautious course reports the whole payment on Part III, however it was funded, as the gifts section says.^134,135,136 If the member was a U.S. person, the estate reports the payment as the gifts section says.

A fund may lend to a member, or guarantee a loan, for a home, secured by a pledge of the member's benefits,¹³⁷ and a divorce order can give a spouse part of a member's pension interest.¹³⁸ Both move or tie up the money, and how they are reported is not settled, since no IRS guidance addresses them. Exchange control on taking money out of South Africa was not researched for this guide.

If the fund is not treated as a §402(b) trust, each contribution you make is a Part I transfer and you are treated as owner of the part it funds, so Part I, Part II, Form 3520-A, and Part III all apply.^{139,58,121,77} Part I also applies at your death as a U.S. citizen or resident, if any part of the fund is then treated as owned by you or is in your gross estate: your executor reports it, whether or not the executor is a U.S. person.¹⁴⁰ If it is not a trust at all, none of these apply.¹³⁹ Either way, an eligible individual whose fund qualifies under Rev. Proc. 2020-17 or the proposed regulations files none of them.^81,95 On our reading the exemption also spares your executor the report of your death, if you were an eligible individual and the plan qualified: it covers an eligible individual's transactions with, or ownership of, the trust, and an eligible individual can be someone who at any time was a U.S. citizen or resident.^141,142,143 No IRS guidance names executors, and the revenue procedure's scope speaks of the eligible individual who would otherwise report.¹⁴⁴ PFIC rules may apply to what the fund invests in; this guide does not decide that. FBAR (FinCEN Form 114) and Form 8938 are separate, and an exemption from Forms 3520 and 3520-A does not remove them.^145,146

The Government Employees Pension Fund (GEPF) continues under the Government Employees Pension Law of 1996, which makes it a juristic person, a legal person in its own right,¹⁴⁷ and it says of itself that it is not a Government institution but a separate juristic entity, which owns its assets while the Public Investment Corporation manages them.^148,149 It is a defined benefit fund, whose benefits the law defines.¹⁵⁰ A person appointed in the employer's service becomes a member from appointment, subject to the Law's exceptions,¹⁵¹ and contributes at the prescribed rate for as long as a member, while the employer contributes at a rate set with regard to the fund's actuarial valuations;^152,153 the current rates were not found in a saved source. Its board has 16 members, 8 for the employer and 8 for members and pensioners.¹⁵⁴

The Income Tax Act treats the GEPF as a pension fund,¹⁵⁵ and the two-pot components reach it as they reach other pension funds.¹⁵⁶ Other funds set up by their own Acts, which the Income Tax Act calls funds established by law,¹⁵⁷ follow this block; they were not researched one by one.

Not settled: a legal (juristic) person set up by statute that owns its assets. Cautious: a foreign trust, as for other funds.

Not settled, for the reasons given for pension and provident funds: a juristic person that owns its assets, with a board half chosen for members and pensioners,^147,154,27 against a fund held for members who cannot assign their interests, as in the IRS's private ruling on a foreign pension entity.³¹ A defined benefit fund that guarantees benefits in law bears the risk, which is the weakest case for a trust,^150,37 but with the question open and the penalty for a missing Form 3520-A large,³⁸ this guide takes the cautious course of reading it as a trust, and a foreign one.^39,40 If it is not a trust, it is classified under the default rules, and Forms 3520 and 3520-A don't reach it.⁴¹

Cautiously, a §402(b) employees' trust; the contribution the law requires while you are a member counts as the employer's.

On the cautious reading this is a §402(b) employees' trust: the employer pays in for each member.^153,45 A trust created outside the United States escapes §402(b) only if it would otherwise meet §401(a),⁴³ and nothing suggests the GEPF does. You become a member by law on appointment and contribute for as long as you are a member,^151,152 so there is no way out while you are employed, and on the IRS Chief Counsel's reading of Singapore's fund, which is not precedent, your contribution counts as your employer's.⁵⁰ Employer money is U.S. income when vested, worked out for one member of a defined benefit fund by actuarial methods,⁴⁹ and the foreign earned income exclusion cannot cover it.⁴⁷

Money you choose to add is your own, and once it exceeds the employer's you are treated as owner of the part it funds, if the grantor trust rules are otherwise met;⁵⁶ in a defined benefit fund whether they are is not settled. Payouts are taxed under §72 when paid or made available,⁶¹ and the savings component, leaving South Africa, leaving a job and retirement are made available as for pension and provident funds, on the same cautious course.⁶⁸

Unlikely, as for pension and provident funds: savings can be drawn once a year with no penalty.

As for pension and provident funds: the GEPF is tax-favored and reported, but savings can be drawn once each tax year with no penalty, so Rev. Proc. 2020-17 and the proposed regulations are unlikely to cover it.^156,89,97

Taxed only in South Africa unless you are a U.S. resident and national; U.S. citizens and green card holders are taxed either way.

Article 19(2) makes a pension paid by South Africa, or out of funds it created, for government service taxable only in South Africa, unless the person is a resident and a national of the United States, who is taxed only there;¹⁵⁸ on our reading a GEPF pension is paid out of funds the State created, though the GEPF is not a Government institution,¹⁴⁸ and the Technical Explanation puts funded plans for government employees under Article 19.¹⁵⁹ The saving clause spares Article 19 only for people who are neither U.S. citizens nor green card holders,¹⁶⁰ so a citizen or green card holder pays U.S. tax on a GEPF pension either way, with a credit for any South African tax.¹¹¹ Service in a government trade or business falls under Article 18 instead.¹⁶¹ Article 18(6), for someone who comes to work in the United States, needs a competent authority agreement, as for pension and provident funds.^103,105

Part II and 3520-A once your own money passes your employer's; Part III for payouts and amounts made available.

Read as a §402(b) trust, as for pension and provident funds: no Part I for any contribution.⁶⁰ No Part II or Form 3520-A for the employer-funded part, the contribution the law requires included; Part II and Form 3520-A can apply if your own money comes to exceed your employer's, and are then due each year for the part it funds.^48,56,121 Part III can apply if you receive a payout from a part you own, on lines 24 and 27,¹²² or, on the cautious course, if an amount is made available to you, money moves out, or a death benefit is paid to you as a U.S. dependant or nominee, unless you report it as compensation income.^123,68,66 Money counted as made available in an earlier year and paid out later goes on Part III when it is paid, with a statement naming the year it was counted, whether or not it went on Part III that year: the count was a constructive receipt and the payout is the actual one, and line 24 covers what you receive actually or constructively, whether or not it is taxable; what was taxed when it was made available is basis by then, not compensation income you report, so the compensation exception does not take it off.^123,124,66 On the cautious course, a payout that mixes that money with growth or other money taxed only when it is paid goes on Part III in full, the part you report as compensation income included, since the exception covers a distribution you report as compensation income and part of this one is not.^123,66 No Form 4970: payouts from a §402(b) trust are taxed under §72, not under the trust distribution rules.^61,125 If the GEPF does not file Form 3520-A, you attach a substitute to your Form 3520.¹²⁷

If it is not a trust, none of these apply, since Forms 3520 and 3520-A report foreign trusts.¹³⁹ FBAR (FinCEN Form 114) and Form 8938 are separate, and an exemption from Forms 3520 and 3520-A does not remove them.^145,146

No contributory state pension was found. The National Treasury describes the first pillar of South Africa's retirement system as the social old age grant, a means-tested payment.^162,163 An older person's grant is paid to people who are 60 or older and live in South Africa, and the South African Social Security Agency (SASSA) pays it.^164,165 The Unemployment Insurance Fund (UIF) gives short-term relief to workers who become unemployed or cannot work because of maternity, adoption and parental leave, or illness, on contributions of 1% of pay from the employee and 1% from the employer.^166,167

Not a trust: a means-tested grant and short-term insurance benefits, with no account held for you.

Not a trust: a trust needs trustees who take title to property to protect or conserve it for beneficiaries,¹⁶⁸ and these are benefits the State pays, a grant on a means test and insurance benefits for spells out of work, with no account held for you.^163,166

Does not apply: no employees' trust holds money for you.

§402(b) reaches an employer's contributions to an employees' trust,⁴⁵ and neither benefit is paid from one.

Not needed.

Since §6048 reaches only foreign trusts.¹³⁹

South African social security paid to a U.S. resident or citizen is taxed only in South Africa, if these count as such.

Article 18(2) makes social security benefits and other similar public pensions paid by South Africa to a U.S. resident or a U.S. citizen taxable only in South Africa, and the saving clause spares it for everyone;^169,102 the reference to citizens is there so that a South African payment to a U.S. citizen living outside the United States is not taxed by the United States.¹⁷⁰ Whether a means-tested grant or a UIF benefit counts as social security for that article is not settled. The same article makes U.S. Social Security paid to a resident of South Africa taxable only in the United States.¹⁶⁹ The United States has no social security agreement with South Africa.¹⁷¹

Nothing on Form 3520 or 3520-A; Form 8938 does not count foreign social security.

No Part I, Part II, Form 3520-A, Part III, or Form 4970: Forms 3520 and 3520-A report foreign trusts, and these are not trusts.^139,121,77 Form 8938 does not count foreign social security.¹⁷² FBAR (FinCEN Form 114) and Form 8938 are separate, and an exemption from Forms 3520 and 3520-A does not remove them.^145,146

A retirement annuity fund (RA) is a fund approved by SARS for the sole purpose of providing life annuities for its members, annuities for dependants or nominees, and savings withdrawals,¹⁷³ whose rules provide for contributions by the members, transfers from other funds included.¹⁷⁴ It is not a contract between you and an insurer: an insurer may issue a policy to the RA fund, and the policy is the fund's.^175,176 A fund may instead hold unit trusts through an investment platform (the law's term is an administrative financial service provider),¹⁷⁷ and the law lets a fund's assets be kept in the fund's name by an insurer, a fund manager or a nominee company.¹⁷⁸

No annuity or retirement lump sum is paid before 55, the RA's normal retirement age, unless you become permanently unable to work in your occupation;^179,180 a member who stops contributing may take a lump sum where the interest is small, or after three uninterrupted years of non-residence, or on leaving South Africa at the expiry of a work or visit visa.^181,182,183 Withdrawal on emigration recognised by the Reserve Bank was deleted from 1 September 2024.¹⁸⁴ The two-pot components apply from 1 September 2024,¹⁰ but not to a legacy retirement annuity policy, one an insurer issued to an RA fund before that date with a construct that meets conditions the Financial Sector Conduct Authority (FSCA) sets, which has no savings component.^175,185 Contributions are deductible within the same limits as for employer funds.⁷ An employer may pay into your RA, and South Africa taxes that as your fringe benefit and deems it contributed by you.⁵¹

Not settled: a registered fund holds the policy or units for you. Cautious: a foreign trust, as for employer funds.

Not settled, for the reasons given for pension and provident funds: a registered fund is a body corporate that owns its assets,^24,25 against a fund that holds money for members who cannot assign it, as in the IRS's private ruling on a foreign pension entity.^34,31 The case for a trust is a little stronger here: an RA fund may be exempted from having board members its members elect,³ so the point that beneficiaries who help run a fund are not beneficiaries who cannot share in its responsibility may not arise.²⁷ It is weaker where an insurer underwrites the benefit and the fund's asset is a policy: the insurer bears the risk, and the Code treats insurance companies as corporations.³⁷

With the question open and the penalty for a missing Form 3520-A large,³⁸ this guide takes the cautious course of reading an RA fund as a trust, and a foreign one.^39,40 If your documents show that you hold a policy directly with an insurer and no RA fund holds it for you, that is a contract, as the block on insurance policies below says.³⁷

Does not apply: only you pay in; an employer's payment is your pay, as South Africa taxes it.

§402(b) reaches an employer's contributions to an employees' trust,⁴⁵ and an RA fund is not an employer's fund: its rules provide for contributions by the members.¹⁷⁴ An employer's payment into your RA is your pay, put in for you, which is how South Africa itself treats it, as a fringe benefit deemed contributed by you.⁵¹ So on our reading you are treated as owner of your interest: its income is credited to you,⁵⁹ and money you put in as a U.S. person makes you owner too.^58,186 The argument against Part I is that the exception covers a transfer to a trust described in §402(b),⁶⁰ and an RA fund some employers pay into could be argued to be one; on our reading it is not an employees' trust at all, and the cautious course reports Part I.

Unlikely under both routes: no earnings condition on paying in, and the savings component can be drawn once a year.

Rev. Proc. 2020-17 exempts an eligible individual⁸⁰ for a retirement trust that meets its conditions.⁸¹ An RA fund is tax-favored, and contributions are reported to SARS,^82,85,84,87 but two conditions are likely not met. Contributions must come only from earned income,⁸⁸ and the rules provide for contributions by the members with no earnings condition, the deduction itself measured on taxable income as well as pay.^174,7 Payouts must wait for retirement, disability or death or carry a penalty,⁸⁹ while a savings withdrawal comes once each tax year with no penalty beyond ordinary tax.^11,91 The limit is open, as for employer funds.^93,8 The proposed regulations need contributions only generally from earned income and let a value test stand in for a limit, but keep the payout condition in the same words, so they are unlikely too.^187,96,97,95

No deferral; the Technical Explanation lists only occupational funds for South Africa. The United States taxes payouts.

No deferral. The saving clause keeps U.S. tax on residents and citizens,⁹⁹ and Article 18(6) would help only someone who comes to work in the United States, in a plan the U.S. competent authority has agreed corresponds, and the IRS lists no such arrangement for South Africa.^103,105 The Technical Explanation lists only occupational plans, pension and provident funds, for South Africa, and lets the competent authorities agree to others,^108,188 so which article limits South African tax on an RA payout to a U.S. resident is not settled; the United States taxes it either way, with a credit for South African tax.¹¹¹ Form 8833 is waived for pensions and annuities.¹¹⁴

On the cautious course, full reporting, as for a foreign trust you own, with Part I for money that goes in.

On the cautious course, you report your RA as a foreign trust you own: you are treated as owner because its income is held for you and you put the money in,^59,58 so Part II and Form 3520-A are due each year,¹²¹ and payouts and savings withdrawals go on Part III, lines 24 and 27, as payouts to an owner.^77,122 Part I can apply if you, or an employer for you, pay in, or money moves in, while you are a U.S. person: each such payment is a Part I transfer, and money put in within 5 years before your U.S. residency started is treated as transferred on your residency starting date and goes on Part I for that year.^139,186 Part I also applies at your death as a U.S. citizen or resident, if any part of the fund is then treated as owned by you or is in your gross estate: your executor reports it, whether or not the executor is a U.S. person.¹⁴⁰ Being yours, the balance is not made available to you in the §402(b) sense, so leaving South Africa does not change these answers. If the fund does not file Form 3520-A, you attach a substitute to your Form 3520.¹²⁷ No Form 4970, because the income is taxed to you each year.¹²⁶

On a member's death the board decides who receives the benefit among dependants and nominees.¹²⁸ A payment to a U.S. dependant or nominee of a member who was not a U.S. person is a payout from a foreign trust, and the cautious course reports it on Part III;⁷⁷ whether it can carry out income kept in earlier years, with Form 4970, is not settled.¹³¹ A child's share held in a beneficiary fund or trust follows the course for pension and provident funds.¹³⁰

If an RA fund is not a trust, none of these apply.¹³⁹ An eligible individual whose fund qualifies under Rev. Proc. 2020-17 or the proposed regulations files none of them.^81,95 On our reading the exemption also spares your executor the report of your death, if you were an eligible individual and the plan qualified: it covers an eligible individual's transactions with, or ownership of, the trust, and an eligible individual can be someone who at any time was a U.S. citizen or resident.^141,142,143 No IRS guidance names executors, and the revenue procedure's scope speaks of the eligible individual who would otherwise report.¹⁴⁴ PFIC rules may apply to the unit trusts a fund holds; this guide does not decide that. FBAR (FinCEN Form 114) and Form 8938 are separate, and an exemption from Forms 3520 and 3520-A does not remove them.^145,146

A pension preservation fund or provident preservation fund is a registered fund for former members of an employer's fund who left the job and chose to move their benefit to it, and for transfers from other preservation funds, divorce awards and unclaimed benefits;¹⁸ nothing goes in except those transfers.¹⁸⁹ A transfer keeps its components, vested to vested, savings to savings and retirement to retirement,¹⁸ and moving the benefit in is free of South African tax.¹⁹⁰

Before retirement a member may take one withdrawal from the vested component, counted across all preservation funds, not fund by fund,¹⁹¹ and savings withdrawals as for other funds.¹¹ After three uninterrupted years of non-residence, or on leaving at the expiry of a work or visit visa, the whole vested and retirement components can be taken, even after the one withdrawal.^192,193 Withdrawal on emigration recognised by the Reserve Bank was deleted from 1 September 2024.¹⁸⁴ Otherwise benefits start from 55.¹⁸⁰

Not settled, as for employer funds: a registered fund that owns its assets. Cautious: a foreign trust.

Not settled, for the reasons given for pension and provident funds: a registered body corporate that owns its assets,^24,25 against a fund held for members who cannot assign their interests.^34,31 A preservation fund may be exempted from having board members its members elect,³ which weakens the point that members share in running it.²⁷ With the question open and the penalty for a missing Form 3520-A large,³⁸ this guide takes the cautious course of reading it as a trust, and a foreign one.^39,40

Not settled. It takes no employer's money, only transfers, so the cautious course is the whole balance; the other reading is real.

Two readings are open, and no IRS guidance chooses between them. On one, the preservation fund continues the employees' trust the money came from: if a trust makes a gratuitous transfer to another trust, the grantor of the first generally stays the grantor of the second.¹⁹⁴ Your employer would stay a grantor of what it funded, with no Part I, and Part II only if your own money exceeds the employer's.

On the other, it is a foreign trust you own, on the whole balance. That is this guide's cautious course, as this site takes for Switzerland's vested benefits accounts. A preservation fund takes no contributions, only transfers in,¹⁸⁹ §6048(a)(3)(B)(ii) covers only employer-plan trusts such as one described in §402(b),⁶⁰ and §402(b) reaches an employer's contributions to an employees' trust,⁴⁵ while a missing Form 3520-A costs 5% of the balance.³⁸ This course may overstate what you own, by treating money your employer funded as yours, and the amount on Form 3520-A is what the 5% penalty is measured on. If you left your benefit in the old fund instead of moving it here, the block on pension and provident funds covers it: on the cautious course it was made available when you left the job, so far as you could take it in cash.⁶⁸

Unlikely: money comes only by transfer, and the one early withdrawal and savings withdrawals carry no penalty.

Rev. Proc. 2020-17 exempts an eligible individual⁸⁰ for a retirement trust that meets its conditions.⁸¹ A preservation fund is tax-favored and reported to SARS like other funds,^82,85,84,87 but money comes only by transfer, which Rev. Proc. 2020-17 protects only if the sending fund itself qualifies,^189,195 and the one early withdrawal and savings withdrawals need no reason and carry no penalty beyond ordinary tax.^191,11,89 So it is unlikely to qualify, and the proposed regulations use the same words on payouts.^97,95

No deferral: the saving clause keeps U.S. tax, as for employer funds.

No deferral, as for pension and provident funds: the saving clause keeps U.S. tax,⁹⁹ and Article 18(6) needs a competent authority agreement the IRS does not list.^103,105 On this course the United States taxes the income each year and South Africa taxes the payout, so the two can fall in different years, and South African tax is credited subject to the limitations of U.S. law.^126,111

On the cautious course, full reporting on the whole balance, as for a foreign trust you own; this may overstate what you own.

On the cautious course, you report it as a foreign trust you own, on the whole balance: its income is held for you,^59,58 so Part II and Form 3520-A are due each year,¹²¹ and payouts, the one early withdrawal and savings withdrawals included, go on Part III, lines 24 and 27, as payouts to an owner.^77,122 Part I can apply if money moves in while you are a U.S. person, and money moved in within 5 years before your U.S. residency started is treated as moved on your residency starting date and goes on Part I for that year.^139,186 Part I also applies at your death as a U.S. citizen or resident, if any part of the fund is then treated as owned by you or is in your gross estate: your executor reports it, whether or not the executor is a U.S. person.¹⁴⁰ The money leaving the employer's fund goes on that fund's Part III unless you report it as compensation income.⁶⁶ Being yours, the balance is not made available to you in the §402(b) sense, so leaving South Africa does not change these answers. If the fund does not file Form 3520-A, you attach a substitute to your Form 3520.¹²⁷ No Form 4970, because the income is taxed to you each year.¹²⁶

On the other reading in the §402(b) step, a continuing employees' trust, there is no Part I, and Part II only if your own money exceeds the employer's.^194,56

A death benefit paid to a U.S. dependant or nominee of a member who was not a U.S. person is a payout from a foreign trust, reported on Part III on the cautious course;⁷⁷ whether it can carry out income kept in earlier years, with Form 4970, is not settled.¹³¹ If a preservation fund is not a trust, none of these apply.¹³⁹ PFIC rules may apply to what the fund invests in; this guide does not decide that. FBAR (FinCEN Form 114) and Form 8938 are separate, and an exemption from Forms 3520 and 3520-A does not remove them.^145,146

At retirement a fund may pay your annuity itself, buy it in the fund's name, or buy it in your name from an insurer;²³ this block is a living annuity bought in your name, and one the fund pays or holds stays in the fund's own block. A living annuity is a right to an annuity whose value is determined solely by the value of assets specified in the annuity agreement and held to provide it,¹⁹⁶ whose amount the insurer or fund does not guarantee.¹⁹⁷ The full remaining value may be paid as a lump sum only when it falls below a figure the Minister prescribes,¹⁹⁸ and on your death the value may go to a nominee as an annuity or a lump sum.¹⁹⁹ Any annuity bought at retirement must be compulsory and non-commutable, and cannot be transferred, assigned or attached.²⁰⁰ The yearly drawing limits the Minister prescribes were not read for this guide.

Not settled: its value is only what specified assets earn, with no guarantee. Cautious: a foreign trust you own.

Not settled, and no IRS guidance addresses living annuities. The argument that it is not a trust: it is a policy a long-term insurer issues, and annuity contracts in payment sit in the insurer's own untaxed policyholder fund;²⁰¹ the Code treats insurance companies as corporations;³⁷ and where you direct the assets behind a policy you may be treated as owning them, which makes no trust.²⁰² This site reads Singapore's investment-linked policies, Germany's Rürup pensions and private pension insurance, and Ireland's retirement annuity contracts with an insurer as contracts, not trusts, and an investment-linked policy has no guarantee either.

The argument that it may be one: the closest reasoning this site has published is Germany's on pure contribution plans, which pay only what a separate pool of assets earns, with no guarantee, closer to property held for members than to insurance; a living annuity's value, by law, is only that of the assets held to provide it, and nothing is guaranteed.^196,197 What sets it apart from the contracts above is the two together, both set by statute: its value is fixed solely by the assets held for it, with no guarantee, and the money is locked for retirement, non-commutable and not assignable. Germany's Rürup contracts are locked by statute too, and an investment-linked policy has no guarantee either; neither has both.^196,197,200 With the question open and the penalty for a missing Form 3520-A large,³⁸ this guide takes the cautious course of reading it as a trust you own, and a foreign one.^39,40 If the documents show a guaranteed amount, the next block applies.

Does not apply: no employer pays in; buying it is the fund's payout of its whole value.

§402(b) reaches an employer's contributions to an employees' trust,⁴⁵ and no employer pays into a living annuity. The move in is the fund's payout: where a trust distributes an annuity contract, a regulation counts the contract's entire value as the distribution,⁷⁶ so buying the living annuity in your name is, on our reading, a payout of its whole value from the fund that year, taxed above your basis,^61,63 and on the cautious course on the fund's Part III unless you report it as compensation income.⁶⁶ From an RA or preservation fund you report as your own, it is a payout to an owner.¹²²

Possible, not settled: tax-favored and locked, but money comes in only as a purchase from a fund.

Possible, not settled. A living annuity is tax-favored, its assets in the insurer's untaxed policyholder fund,^201,84 and payouts come only after retirement.⁸⁹ But money comes in only as a purchase from a fund, which Rev. Proc. 2020-17 protects only if the sending fund itself qualifies,¹⁹⁵ and no IRS guidance addresses living annuities, so whether one qualifies is not settled; the proposed regulations use the same words on payouts.^97,95

No deferral; a living annuity is not a stated sum, so Article 18(3) may not apply. The U.S. result is the same.

No deferral. Article 18(3) lets South Africa also tax an annuity bought there while its owner lived there, but defines an annuity as a stated sum paid periodically,²⁰³ and a living annuity is not a stated sum, so that article may not apply; Article 18(1) may apply instead, as for pensions.¹⁰⁷ Either way the saving clause keeps U.S. tax on residents and citizens,⁹⁹ and Treasury says paragraphs 1 and 3 of Article 18 are subject to it.²⁰⁴ Form 8833 is waived for pensions and annuities.¹¹⁴

On the cautious course, full reporting, as for a foreign trust you own, with Part I for the money moved in.

On the cautious course, you report the living annuity as a foreign trust you own: its income is held for you,^59,58 so Part II and Form 3520-A are due each year,¹²¹ and annuity payments and lump sums go on Part III, lines 24 and 27, as payouts to an owner.^77,122 Part I can apply if money moves in while you are a U.S. person: the purchase is a Part I transfer, and money moved in within 5 years before your U.S. residency started is treated as moved on your residency starting date and goes on Part I for that year.^139,186 Part I also applies at your death as a U.S. citizen or resident, if any part of the annuity is then treated as owned by you or is in your gross estate: your executor reports it, whether or not the executor is a U.S. person.¹⁴⁰ If the insurer does not file Form 3520-A, you attach a substitute to your Form 3520.¹²⁷ No Form 4970, because the income is taxed to you each year.¹²⁶

On your death the value can go to a nominee as an annuity or a lump sum.¹⁹⁹ Paid to a U.S. nominee of an annuitant who was not a U.S. person, it is a payout from a foreign trust, and the cautious course reports it on Part III;⁷⁷ whether it can carry out income kept in earlier years, with Form 4970, is not settled.¹³¹ A U.S. nominee who keeps it as an annuity reports its value on Part III for the year it passes to them, on the cautious course, as for an inherited ARF in Ireland;⁷⁷ the nominee could have taken the lump sum, and afterwards can take one only below the prescribed value;¹⁹⁸ a person who has partly released a power over a trust but keeps control that would make a grantor owner is treated as owner,²⁰⁵ so on the cautious course the nominee is owner from then on, with this block's Part II, Form 3520-A and Part III answers and no Part I. Whether the nominee chose the annuity depends on documents this guide did not read.

If a living annuity is not a trust, none of these apply, and how a foreign annuity contract is taxed in the United States is not decided here.¹³⁹ PFIC rules may apply to the funds behind it; this guide does not decide that. FBAR (FinCEN Form 114) and Form 8938 are separate, and an exemption from Forms 3520 and 3520-A does not remove them.^145,146

At retirement a fund may buy an annuity in your name from an insurer,²³ and this block is one the insurer guarantees for your life. It must be compulsory and non-commutable, payable for your lifetime, and cannot be transferred, assigned or attached.²⁰⁰ It is not a living annuity, whose amount is not guaranteed and whose value is only that of assets held for it.¹⁹⁷

Not a trust: a contract with an insurer, which bears the risk and holds the assets.

Not a trust: a contract with a long-term insurer, which bears the risk and holds the assets as its own; annuity contracts in payment sit in the insurer's untaxed policyholder fund,²⁰¹ and the Code treats insurance companies as corporations.³⁷ The IRS's private ruling that a foreign pension entity was a trust concerned an entity holding assets for covered employees who could not assign their interests, not a policy an insurer sells.³¹

Does not apply: no employer pays in; buying it is the fund's payout of its whole value.

§402(b) reaches an employer's contributions to an employees' trust,⁴⁵ and no employer pays into the annuity. Buying it in your name is the fund's payout of the contract's entire value that year,⁷⁶ which the fund's own block covers.

Not needed.

Since §6048 reaches only foreign trusts.¹³⁹

Article 18(3) or 18(1) may let South Africa also tax it; the saving clause keeps U.S. tax either way.

Article 18(3) makes an annuity taxable where its owner lives, unless it was bought in the other country while the owner lived there, when that country may also tax it;²⁰³ but an annuity bought with retirement savings may be a pension under Article 18(1) instead, since the Technical Explanation treats an annuity received in consideration for services as deferred compensation;^206,107 the saving clause keeps U.S. tax on residents and citizens either way.^99,204

Nothing on Form 3520 or 3520-A for the annuity itself; the purchase is the fund's payout, in that fund's block.

No Part I, Part II, Form 3520-A, Part III, or Form 4970 for the annuity itself: Forms 3520 and 3520-A report foreign trusts.^139,121,77 How a foreign annuity contract is taxed in the United States is not decided here.

The purchase is a payout of the contract's whole value from the fund that bought it, which that fund's block puts on Part III on the cautious course unless you report it as compensation income.^76,66 FBAR (FinCEN Form 114) and Form 8938 are separate, and an exemption from Forms 3520 and 3520-A does not remove them.^145,146

A tax-free investment, sold as a tax-free savings or investment account (TFSA),²⁰⁷ is a financial instrument or policy owned by a natural person and administered by a person or entity the Minister designates,²⁰⁸ whose returns are exempt from tax.²⁰⁹ Banks, long-term insurers, collective investment scheme managers, the national government, and mutual and co-operative banks may issue one.²¹⁰ Contributions are limited to R36,000 a tax year and R500,000 in a lifetime, and 40% of any excess is charged as tax;^211,212 the 2026 Budget would raise the yearly limit to R46,000, in a Bill that was not law when checked, as the gifts section explains.²¹³ Money in one must be paid to you within seven business days of asking, or 32 for one with a maturity date.²¹⁴

Not a trust: title is yours, and the money is payable to you on request within days.

Not a trust, on our reading. A deposit with a bank, a bond the national government issues, a policy with an insurer, or units registered in your own name are yours: the law has the investment owned by you,²⁰⁸ and you can have the money within days, with no lock.²¹⁴ A trust needs trustees who take title to protect or conserve property for beneficiaries,¹⁶⁸ and a holder that only holds and transfers title at the owner's direction is no trustee.²¹⁵ The strongest point the other way is that a tax-free investment must be run by a designated administrator, and a unit trust manager must be able to identify each investor's tax-free account and report on it each quarter;^208,216 but that is record-keeping, and title stays with you, as for a UK cash ISA. Where an investment platform's nominee holds the units for you, the next block applies, and where the documents don't show who holds title, the cautious course follows it too.

Does not apply: no employer pays in, and no trust holds the account.

§402(b) reaches an employer's contributions to an employees' trust,⁴⁵ and no employer pays into a tax-free account.

Not needed.

Since §6048 reaches only foreign trusts.¹³⁹ Rev. Proc. 2020-17 would not fit anyway: it covers retirement trusts and medical, disability or educational savings, not general savings.²¹⁷

No effect on these forms; the United States taxes the income though South Africa exempts it.

No effect on these forms: the saving clause lets the United States tax its residents and citizens as if the treaty had not come into effect,⁹⁹ so the account's income is taxed in the United States as it arises, though South Africa exempts it.²⁰⁹

Nothing on Form 3520 or 3520-A. PFIC rules may apply to fund units.

No Part I, Part II, Form 3520-A, Part III, or Form 4970: Forms 3520 and 3520-A report foreign trusts.^139,121,77 PFIC rules may apply to unit trusts or exchange traded funds held in the account; this guide does not decide that. FBAR (FinCEN Form 114) and Form 8938 are separate, and an exemption from Forms 3520 and 3520-A does not remove them.^145,146

Tax-free investments in unit trusts or exchange traded funds can be held through an investment platform: the designated administrators include administrative financial service providers;¹⁷⁷ where the platform's nominee company holds the units in its name for you, title is not in your name, though the limits and the payment within seven business days are as in the block before.^211,214 A tax-free investment can be owned by any natural person,²⁰⁸ a child included, on our reading.

Not settled: a platform's nominee holds title for you, as in a UK stocks and shares ISA. Cautious: a foreign trust.

Not settled, and no IRS guidance addresses South African tax-free accounts. Federal law, not South Africa's label, decides.²¹⁸ The argument that it is not a trust: the law has the investment owned by you,²⁰⁸ and a holder that only holds and transfers title at the owner's direction is no trustee.²¹⁵ The argument that it may be one: that ruling does not apply where the holder does more than hold title,²¹⁹ and a nominee that holds title, keeps your account and reports on it does more.²¹⁶ That is the case of a UK stocks and shares ISA, which this site also reports on the cautious course. With the question open and the penalty for a missing Form 3520-A large,³⁸ this guide takes the cautious course of reading it as a trust, and a foreign one.^39,40

Does not apply: no employer pays in.

§402(b) reaches only an employer's contributions to an employees' trust,⁴⁵ and no employer pays into a tax-free account.

None: neither Rev. Proc. 2020-17 nor the proposed regulations' exemption reaches a general savings account.

Rev. Proc. 2020-17 covers only retirement trusts and medical, disability, or educational savings trusts,^220,217 and a tax-free account is general savings, so even as a trust it would not qualify. The proposed regulations describe a further category, savings trusts worth $50,000 or less, but the rule that grants the exemption lists only the retirement and medical, disability, or educational categories, so we do not rely on it.¹⁴³

No effect: the saving clause keeps U.S. tax on the income as it arises.

No effect: the saving clause lets the United States tax its residents and citizens as if the treaty had not come into effect,⁹⁹ so the income is taxed in the United States each year, though South Africa exempts it.²⁰⁹

On the cautious course, full reporting, as for a foreign trust you own.

On the cautious course, you report it as a foreign trust you own: its income is held for you,^59,58 so Part II and Form 3520-A are due each year,¹²¹ and withdrawals go on Part III.⁷⁷ Part I can apply if you pay in while you are a U.S. person: each payment in is a Part I transfer, and one made within 5 years before your U.S. residency started is treated as made on your residency starting date and goes on Part I for that year.^139,186 Part I also applies at your death as a U.S. citizen or resident, if any part of the account is then treated as owned by you or is in your gross estate: your executor reports it, whether or not the executor is a U.S. person.¹⁴⁰ If the platform does not file Form 3520-A, you attach a substitute to your Form 3520.¹²⁷ No Form 4970 for your own account, because the income is taxed to you each year.¹²⁶ An account for a child is reported by whoever pays in: a U.S. parent who pays in reports each payment on Part I and is treated as owning the part it funds, with Part II and Form 3520-A each year.^139,58,121 Form 4970 can apply if the account is a minor's and no U.S. person paid in: money paid in by someone who is not a U.S. person is not treated as owned by that person,²²¹ and on our reading a minor is not owner of it either, though the child is also a grantor of money paid in on the child's behalf, and this site's Singapore guide reads that as making a child owner, so it is not settled.¹³² On our reading a U.S. child reports withdrawals of it on Part III, where Form 4970 can apply to income kept in earlier years.^77,131 Once the child is an adult who can ask for the money, on our reading the child is owner of it, as for an adult's own account.²²² If it is not a trust, none of these apply. PFIC rules may apply to the funds held; this guide does not decide that. FBAR (FinCEN Form 114) and Form 8938 are separate, and an exemption from Forms 3520 and 3520-A does not remove them.^145,146

A long-term insurer places the assets behind a policy that an individual owns in its individual policyholder fund,²²³ which is taxed as if it were a separate taxpayer.²²⁴ This block covers endowments and other savings policies you own outside a retirement fund. Bank deposits and securities in your own name, or held by a broker for you, are yours and are not reported on these forms either.²¹⁵

Not a trust: a contract with a long-term insurer, which holds the assets in its own policyholder fund.

Not a trust, on our reading. A trust needs trustees who take title to protect or conserve property for beneficiaries,¹⁶⁸ and an insurer owns its assets and owes you a contract; the Code treats insurance companies as corporations.³⁷ The strongest authority the other way is the IRS's private ruling that a foreign pension entity was a trust,²²⁵ but that entity held assets for covered employees who could not assign their interests, not policies an insurer sells to the public. Under a policy whose investments you direct you may be treated as owning the assets behind it for U.S. tax, which makes no trust.²⁰² Whether a policy meets the U.S. definition of life insurance is a separate question this guide does not decide.

Does not apply: no employer pays in, and a policy is not a trust.

§402(b) reaches only an employer's contributions to an employees' trust,⁴⁵ and a policy you hold yourself is not one.

Not needed.

Since §6048 reaches only foreign trusts.¹³⁹

No effect on these forms.

The saving clause lets the United States tax its residents and citizens as if the treaty had not come into effect.⁹⁹

Nothing on Form 3520 or 3520-A. A policy's U.S. income tax is not decided here.

No Part I, Part II, Form 3520-A, Part III, or Form 4970: Forms 3520 and 3520-A report foreign trusts.^139,121,77 How a foreign policy is taxed in the United States is not decided here. PFIC rules may apply to funds held under a policy or in your own name; this guide does not decide that. FBAR (FinCEN Form 114) and Form 8938 are separate, and an exemption from Forms 3520 and 3520-A does not remove them.^145,146

South African law defines a trust as an arrangement through which property is made over to a trustee to administer for the beneficiaries, an ownership trust, or to the beneficiaries with control placed in a trustee, a bewind trust; an executor, tutor or curator is not a trustee for this purpose.²²⁶ SARS says a bewind trust's assets remain the beneficiaries' property, administered by the trustees, and either kind can be set up during life or by will.²²⁷ A trustee may act only once the Master of the High Court, the court official who oversees trusts and estates, has authorised it in writing,^228,229,230 and trust property is not part of the trustee's personal estate.²³¹ Employee share schemes and broad-based ownership schemes run through trusts are not covered by this guide.

South Africa taxes trusts in its own way, separately from Forms 3520 and 3520-A. A trust taxed in its own right pays a flat 45%,²³² and an effective 36% on capital gains.²³³ From 1 March 2026 income vested in a resident beneficiary is taxed to that beneficiary, while income vested in a non-resident beneficiary, a U.S. beneficiary living in the United States for example, is taxed in the trust, unless section 7 taxes it on a resident donor.^234,235,236 Income a non-resident receives because of a resident's donation is included in the resident's income,²³⁷ and the interest forgone on a low-interest or interest-free loan from a connected person to a trust is treated as a donation each year, so donations tax.²³⁸ How South African tax the trust pays is credited in the United States is not decided here.

A foreign trust, unless a U.S. court supervises it and U.S. persons control it. Bewind trusts: not settled, reported as trusts.

A trust under South African law is a trust for U.S. purposes where the trustee holds property for the beneficiaries,¹⁶⁸ and a foreign one, governed by South African law and administered there.^39,40 A bewind trust, whose beneficiaries own the property while the trustees control it, may not be a trust for U.S. purposes, since a holder that only holds title for its owner is no trustee,^215,227 but that ruling is narrow, and a trustee whom the Master authorises, with duties under the Act, does more than hold title,^219,228 so whether a bewind trust is one is not settled, and the cautious course reports it as a trust. If the trustee mainly runs a business for profit rather than holding property for the family, U.S. law may classify the arrangement as a business entity rather than a trust.²³⁹

A U.S. person who funds it is owner when it has a U.S. beneficiary; a foreign settlor only in two narrow cases.

Who is treated as owner decides who files Part II and Form 3520-A. A U.S. person who transfers property to the trust is treated as owner of the part it funds for any year in which the trust has a U.S. beneficiary.⁵⁸ Someone who funds the trust while not a U.S. resident and becomes one within 5 years is treated, for this rule and for Part I, as transferring that part of the trust on the day their U.S. residency starts.¹⁸⁶ A settlor who is not a U.S. person is treated as owner only if they can revoke the trust alone or with the consent of a related or subordinate party subservient to them, or if only they or their spouse can receive distributions during their life.²²¹ Otherwise, unless another grantor trust rule makes a U.S. person owner,⁵⁹ no one is owner, and the trust is taxed as a separate, non-grantor trust.²⁴⁰

Loans. A U.S. person who is a grantor or beneficiary of the trust, or related to one, and lends to it in return for the trust's own obligation is still treated as transferring property, since that obligation is left out of the fair market value exception,²⁴¹ unless the loan is a qualified obligation under the regulations.²⁴² Funding a trust on loan account is the arrangement South Africa's section 7C addresses.²³⁸ Loans the other way, from the trust to you, are in the bottom line.

A trust has a U.S. beneficiary for the transferor rule if anyone has discretion to pay or benefit any person, unless its terms identify the class who may benefit and none of them is a U.S. person that year,²⁴³ even if nothing is paid to a U.S. person that year;²⁴⁴ a power to amend the trust to benefit a U.S. person counts, and so does a letter of wishes or other understanding that points to benefiting one, even one that says it is only a suggestion.²⁴⁵ Where a U.S. person funds the trust, the IRS may treat it as having a U.S. beneficiary unless that person shows it has none.²⁴⁶ A beneficiary who first became a U.S. person more than 5 years after the transfer is not counted,²⁴⁷ and a transferor whose trust gains a U.S. beneficiary is taxed that year on the income the trust kept for that part to the end of the year before, as an accumulation distribution with the interest charge.^248,249 A settlor who is not a U.S. person keeps the revocable-trust exception for a year only if they can take the property back alone, or with the consent of a related or subordinate party subservient to them, for at least 183 days of it; a power that needs anyone else's consent, such as an independent trustee's or protector's, does not count.^250,251 Once the exception fails for a year it is lost for good.²⁵² Separately, a portion already treated as owned under §676, or under §677 other than its life insurance rule, on September 19, 1995 keeps that owner for the property it held that day, for as long as it stays so treated.²⁵³ A U.S. settlor of a trust with no U.S. beneficiary can still be owner under another rule, for example by keeping a power to take the property back,²⁵⁴ and a U.S. beneficiary who alone can take the property is owner of it.^222,221

When a settlor who was not a U.S. person dies, the revocable-trust and spouse-only exceptions end for that settlor's portion, because the person left with the power, even a surviving spouse, is not its grantor;²⁵⁵ a U.S. person who alone can take the property, or a U.S. person who funded the trust, can still be owner, and otherwise the portion is taxed as a non-grantor trust.^222,58,240 When a portion stops being owned by a U.S. person, the owner is treated, for the gain rule, as transferring it to a foreign trust that day.²⁵⁶ At death the gain is excused only if the trust's basis in the property is then reset to its value at death under section 1014(a), as where the owner could still revoke the trust;²⁵⁷ otherwise the owner is treated as transferring it immediately before death and recognizes the gain.²⁵⁸

No relief.

The saving clause lets the United States tax its residents and citizens as if the treaty had not come into effect,⁹⁹ and none of the provisions it spares concerns foreign trust reporting.¹⁰²

Part I for whoever funds it, Part II and Form 3520-A for an owner, Part III for whoever receives a distribution.

A U.S. person who transfers property to the trust files Part I for that year.¹³⁹ A transfer to a foreign trust is treated as a sale, and you recognize any gain on what you transfer;²⁵⁹ a transfer is not, to the extent anyone is treated as owning the part it funds.²⁶⁰ Part I also applies on the death of a U.S. citizen or resident who was treated as owner of any part of the trust, or whose gross estate includes part of it, and to property that passes to the trust by reason of a U.S. person's death; the executor reports it, whether or not the executor is a U.S. person.¹⁴⁰ The gain rule does not apply to property that passes to the trust by reason of a U.S. person's death, if its basis in that property is set under section 1014(a).²⁵⁷ A U.S. owner files Part II and makes sure Form 3520-A is filed, or files a substitute, each year.^121,127 A U.S. beneficiary who receives a distribution files Part III for that year.⁷⁷ A distribution from a non-grantor trust that carries out income the trust kept in earlier years is an accumulation distribution, taxed with an interest charge on Form 4970.¹³¹ Form 4970 can also apply to a transferor taxed when the trust gains a U.S. beneficiary, as the owner step says.²⁴⁹ Rev. Proc. 2020-17 does not apply: it covers only retirement trusts and medical, disability, or educational savings trusts.²²⁰ A trust a will sets up belongs here once the estate is wound up.

A distribution is any gratuitous transfer from the trust, whether or not it is a grantor trust and whether or not you are named as a beneficiary, including a credit card bill it pays or guarantees and a check written on its account.²⁶¹ On the proposed rules, a payment from a company the trust owns to a U.S. person who is a grantor, owner or beneficiary of the trust, or related to one, is treated as a distribution from the trust, unless that person shows it is properly attributable to their own interest in the company.^262,95 A loan of cash or marketable securities, or use of trust property, to you or a related U.S. person goes on Part III whether or not it is taxable;²⁶³ it is treated as a distribution for income tax, except a loan made on a qualified obligation (a written loan in U.S. dollars, for 5 years or less, at an interest rate tied to the federal rate, for which you extend the IRS's time to assess and that you report each year) or use you pay the fair market value for within a reasonable time,^{264,265,266,267} and where a U.S. person funded the trust, the loan instead makes it a grantor trust, and it still goes on Part III.²⁶⁸

If you are the U.S. owner of the part that pays you, you complete only lines 24 and 27, and the rest of this paragraph does not apply to you.¹²² Otherwise, with a complete Foreign Grantor Trust Beneficiary Statement you treat a payment as coming from the owner, so a gift from the owner is not your income;²⁶⁹ without one, the default method applies even to a distribution from a grantor trust.²⁷⁰ From a non-grantor trust you may use the actual method if you have a Foreign Nongrantor Trust Beneficiary Statement,²⁷¹ and without one the default method applies: the part of this year's distributions above 1.25 times the average of the three years before is an accumulation distribution, taxed on Form 4970 with an interest charge figured on Form 3520's Schedule C, and the rest is ordinary income,^272,131,273 and once you use the default method you must keep using it in later years, except that in the year the trust ends you may use the actual method if you have the statement.²⁷⁴ In the trust's first year as a foreign trust, you stop Part III once you have entered how many years it has been foreign, so no accumulation distribution is figured that year.²⁷⁵ The statute treats the whole distribution as an accumulation distribution where adequate records are not given;²⁷⁶ the default method is the IRS's relief from that, open if you can give the trust's distributions for the three years before,²⁷⁷ and where there were none, it too makes the whole distribution an accumulation distribution.²⁷² A foreign trust's distributable net income, the income its distributions carry out, includes its capital gains,²⁷⁸ and the exception for income kept before a beneficiary was born or turned 21 does not apply to it.²⁷⁹ FBAR (FinCEN Form 114) and Form 8938 are separate and may also apply.²⁸⁰

A collective investment scheme (CIS), a unit trust among them, is run by a manager, with a trustee or custodian whose duties include carrying out the manager's instructions unless they are inconsistent with the Act or the deed, and reporting on the limits the Act sets on the manager's investment and borrowing powers.²⁸¹ South Africa's Income Tax Act counts a portfolio of a collective investment scheme as a person in its own right, and its definition of a trust includes one.^282,283