If you’re a South African living abroad and you’ve got parents or close family back home, there’s a chance that you will be named as a beneficiary in someone’s Will some day in the future. If this is you right now and you’ve just been informed that you’re due an inheritance in South Africa, you probably have a few questions at this point: will you have to pay inheritance tax on your inheritance? How can you avoid inheritance tax? What is estate duty and who pays it? This is the South African Inheritance Tax 101 you’ve been looking for.
What is Inheritance Tax?
As the term suggests, “inheritance tax” is a tax on the assets left to a beneficiary in a Will. If you’re inheriting money or property back home, you’ll be pleased to know that as a beneficiary you won’t need to pay a tax on your inheritance in South Africa. This is because the tax is placed on the deceased person in the form of an estate duty in South Africa, which is paid out of the estate.
Who has to pay Inheritance Tax in South Africa?
As a beneficiary, you will not be expected to pay tax on what you inherit after the death of a loved one. Great news if you’re expecting an inheritance – you won’t have to pull any tricks or dodgy moves to avoid paying inheritance tax in South Africa, because it’s not your problem! However, any donations or gifts you receive from this person before their death will be treated differently for tax purposes.
What is estate duty?
Estate duty is basically inheritance tax, except it is levied on the deceased person’s estate instead of being charged to the beneficiaries.
How does estate duty work?
The deceased’s estate will be charged 20% tax if its value exceeds R3.5million, and where the estate is smaller no estate duty will be applied. This estate duty will be paid out of the estate before the beneficiaries are paid out.
DID YOU KNOW?
In 2018 financial companies in South Africa paid out the value of R8.1 billion after locating the owners of unclaimed policies and investments. However, the beneficiaries of more than 147,000 policies and unit trusts remain unfound – that’s roughly R17.1 billion in unpaid policies waiting to be claimed. Imagine if you were the recipient of an unclaimed inheritance in South Africa!
How to claim your South African inheritance if you’re living overseas
If you’re the beneficiary of an inheritance in South Africa, there are three ways this can unfold:
- South African resident temporarily abroad (no financial emigration recorded):
Using your foreign investment allowance you can transfer your inheritance payment abroad – all you’ll need is your SA ID and tax clearance from SARS. Alternatively you can complete the process of financial emigration if you have no intention of returning home, which makes it easier to transfer your inheritance money abroad as a non-resident.
- You are a financial emigrant which means the Reserve Bank sees you as a non-resident for exchange control purposes:
The South African Reserve Bank’s exchange control regulations aren’t as strict for non-residents. To get your hands on your inheritance, provide your reference number or proof of emigration.
- You were born overseas, which means you’re not a citizen or a resident, but you inherited money from South Africa:
As mentioned, exchange control rules aren’t as strict for non-residents. If you were never a South African resident, all you need to do is provide proof thereof in order to get the international transfer authorised.
FinGlobal: cross-border financial services for South Africans
Confused about your exchange control status? Don’t know how to go about transferring your South African inheritance abroad? We can help. FinGlobal is a trusted South African financial services provider with all the in-house financial planning, legal and tax expertise to simplify every cross-border financial transaction, for your peace of mind.
Everything we do is compliant with all the relevant financial services authorities, so you can rest assured it’s 100% above board – no funny business! We offer a complete suite of financial services for South Africans at home and abroad:
- Financial emigration
- Retirement annuity encashment
- Tax refunds
- Tax clearance
- Tax emigration
- Foreign exchange
- Exchange control
- Pension income
For a seamless, stress-free experience when it comes to getting your inheritance transferred abroad, leave us your contact details and let us handle the rest.