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As a South African living abroad, the possibility of a South African-sourced inheritance is likely something you’ll have to consider at some point especially if you’ve got relatives living back home and they’re advancing in age. Or, you might be one of the lucky ones that gets an out-of-the-blue phone call to tell you that a distant great aunt twice removed left you her fortune and her cats. What do you do in such a case? How do you get your inheritance abroad to you, if it’s no good sitting back in South Africa? Will you have to pay tax? Is there a way to make all of this easier? Let’s take a look at what you’ll have to know about South African inheritance tax if you become a beneficiary.

First thing’s first: Is there a tax on inheritance in South Africa?

Great news. By law, inheritance is not seen as a form of income by the South African Revenue Service, therefore as a recipient of an inheritance you are not taxed on this money. This means that inheritance is not taxed in line with donations or any other form of income. Even better? While money or assets gained through inheritance can be considered a receipt of capital, which might attract Capital Gains Tax, this tax responsibility falls on the deceased estate back in South Africa and will have no effect on your inheritance whatsoever. 

How do you get your South African inheritance transferred abroad to you?

If you’re living overseas as a South African resident who has not recorded financial emigration, or you have a blocked Rand account in South Africa, it’s possible to have your inheritance paid to you locally in this South African account. Once it’s cleared, you can then use your foreign investment allowances to move money overseas without any personal tax consequences, provided that the amount is within exchange control limits. If you don’t have a blocked Rand account back home, you can use your annual foreign investment allowance to move your money or apply for financial emigration, after which you’ll have a much easier time of transferring your money out of South Africa, on approval.

Is it even necessary to financially emigrate to gain access to my South African inheritance?

Of course not! That money is yours and nothing can keep you from it. Your funds will be paid into your South African bank account, after which it’s a simple matter of an international transfer without being taxed using your SDA (Single Discretionary Allowance) or FIA (Foreign Capital Allowance), which enable you to move R11 million abroad annually, when used in conjunction.

What is financial emigration and when would I need it?

This is the process of recording with the South African Reserve Bank your change in status from resident to non-resident for financial purposes, as a result of a permanent departure from the country. Just because you’ve left South Africa, doesn’t mean you’ve emigrated financially as this is not an automatic process. All that financial emigration does is change your status to non-resident for exchange control purposes, which means you’re not subject to the same limitations as residents would be. Financial emigration does not affect or remove your tax status or tax liability, nor does it in any way affect your South African citizenship.

Financial emigration is something you’ll consider if you need to shift an inheritance amount in excess of that which you’re entitled to transfer using the various foreign investment allowances and you’re in a hurry, or if you’d like to cash in your retirement annuity or get your hands on your pension before the age of 55. Because it’s a personal choice you need to make based on several other factors at play as well, it’s not a decision to make lightly, but the consequences of having made the decision to emigrate financially can be exceptionally liberating.

Some of the benefits of financial emigration include:

  • Simplifies payment and transfer of your South African sourced inheritance
  • Streamlines the flow of your South African capital and income when living abroad
  • Enables access retirement savings (pension, provident and preservation fund savings) before maturity date

 Read more about the benefits of financial emigration, here.

FinGlobal can help you claim your South African inheritance

Now that we’ve clarified the issue of inheritance tax in South Africa for you, we’re here to tell you that there’s an easier way for you to get your hands on your money while living abroad.

As a South African, cross-border financial transactions can get complicated and seem overwhelming – especially when you’re dealing with lots of bureaucratic red tape back in SA. The right financial services partner can make all the difference for South African expats living abroad, and FinGlobal is ready to help you with every aspect of your international financial portfolio.

We’ll help you decide if financial emigration is your best move and record your tax emigration (tax exit) with SARS if you did not file your final tax when you left. We’ll advise you on every aspect and step of your retirement annuity encashment, or pension fund withdrawal. We’ll also oversee all your foreign exchange requirements, assist with tax refunds as well as the exchange control implications of your inheritance.

To see how our full suite of financial services for expats can make a difference in your life today, contact us today!.

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