Many South Africans now hold assets outside the country — from overseas property and offshore investments to foreign bank accounts. While this is a smart way to grow and protect wealth, passing these assets on to heirs can quickly become complex.
If a South African resident bequeaths foreign assets to an heir, the process involves more than just a will. It’s about understanding how estate planning and taxation work across different countries, and how South African estate duty might still apply — even on assets held offshore.
The challenge? Different tax systems often overlap. That means you could be dealing with death duties in South Africa, plus another layer of foreign estate tax or capital gains tax in the country where the asset is located. Without the right cross-border financial planning, that can result in double taxation or unnecessary delays in transferring the inheritance.
The good news is that with the right advice and a bit of strategising, these issues can be managed; and your heirs can receive what you intended, smoothly and tax-efficiently.
Top 3 takeaways on South African residents bequeathing foreign assets to heirs:
- South African estate duty applies worldwide. If you’re a South African tax resident at the time of death, your estate includes all your assets — locally and abroad. Those foreign investments, properties, or bank accounts may still attract estate duty tax in South Africa.
- Double taxation can be avoided. Many countries have double taxation agreements (DTAs) with South Africa that can be used to prevent estates from being taxed twice on the same assets. Knowing where these treaties apply is key to effective cross-border estate planning.
- The right structure protects your legacy. Tools like offshore trusts and proper tax and estate planning can simplify administration, manage foreign capital gains tax, and ensure your heirs inherit what you’ve worked hard to build, without unnecessary tax leakage.
Estate planning – South African estate duty on foreign assets
In South Africa, estate duty is a form of death tax charged on the worldwide assets of a person who was a South African tax resident at the time of death. This means that even if you own assets abroad (such as a villa in Spain, shares listed in the US, or an offshore investment account) those assets must still be declared when your estate is finalised.
Currently, estate duty in South Africa is charged at 20% on the first R30 million of the dutiable estate and 25% on the value above R30 million. These rates are applied after deductions, including the R3.5 million abatement allowed for individuals, as well as any allowable deductions for debts, bequests to a surviving spouse, or approved charitable donations.
If the deceased had ceased South African tax residency, only local assets would be subject to South African estate duty, but that’s where proper tax and estate planning becomes essential. Determining tax residency at death can make a significant difference to how your estate is taxed.
Tax and estate planning – double taxation risk – death duties abroad
Here’s where it can get tricky. Some countries apply what’s called a situs tax — a tax based on where an asset is located, rather than where the owner lived. So, if you own property or shares in a country that levies estate or inheritance tax, that foreign tax could apply in addition to death duties in South Africa.
This can lead to double death duties, where the same asset is taxed twice — once overseas and once at home. For example, if you own a flat in the UK or shares in a US-listed company, those assets may attract situs-based estate tax in that jurisdiction.
Fortunately, South Africa has double taxation agreements with several countries to help reduce or eliminate this double tax exposure. However, not every country has such a treaty with South Africa, which is why cross-border estate planning is so important.
International estate planning – capital gains tax and the deceased estate
When a person dies, they are treated by the South African Revenue Service (SARS) as if they’ve “sold” their assets to their estate at market value. This triggers capital gains tax (CGT) — even though no actual sale takes place, and the resulting gain (or loss) must be included in the deceased’s final tax return.
This applies to both local and offshore holdings. A property in France or shares in an offshore investment portfolio could be subject to foreign capital gains tax, in addition to capital gains tax on a deceased estate in South Africa.
The good news is that foreign tax credits in South Africa can sometimes be used to offset tax already paid in the foreign country. However, the timing and recognition of these credits can be complex, especially when dealing with deceased estate administration across multiple jurisdictions.
Read more: Capital Gains Tax – what is exempt from CGT in SA? Resident vs non-resident?
Receiving an offshore inheritance in South Africa
If you’re the heir, inheritance money from abroad can also raise tax questions. The first thing to know is that inheritances are generally exempt from income tax in South Africa — you don’t pay tax simply because you inherited funds or assets.
However, once that inheritance starts generating income (for example, interest or rental income), that income becomes taxable under South African foreign income tax rules.
You’ll also need to comply with foreign exchange regulations when bringing inheritance money from overseas into South Africa. If the inheritance involves the sale of offshore assets, it’s essential to understand the capital gains tax implications, both abroad and locally.
Whether you’re receiving inheritance from the UK to South Africa or any other jurisdiction, full disclosure to SARS is vital to maintain compliance and avoid penalties.
How cross-border estate planning protects your heirs
Good cross-border tax planning helps ensure your assets pass to your heirs efficiently and with minimal tax exposure. This often involves using offshore trusts, holding companies, or international investment structures.
An offshore trust can be a useful tool for international estate planning, offering benefits such as asset protection, privacy, and smoother transfer of ownership. There are also tax benefits of a trust in South Africa, including flexibility in managing distributions and potential protection from double taxation.
However, setting up these structures requires careful consideration of trust tax rates in South Africa, offshore investment tax implications, and reporting obligations to SARS. This is where expert help makes all the difference.
Read more: Wills and estate planning for expats – protecting your offshore assets.
FinGlobal: cross-border financial specialists for South Africans
At FinGlobal, we understand that managing wealth across borders can be complex — especially when it comes to estate planning and taxation. Our experienced team helps South Africans plan ahead, making use of double taxation agreements, and handling the deceased estate administration process for offshore assets with confidence.
We also support clients with tax emigration, international money transfers, and obtaining SARS tax clearance, ensuring that moving funds or assets across borders is smooth, compliant, and tax-efficient. Whether you’re planning your estate, managing offshore inheritance, or ensuring compliance with South African taxation, FinGlobal can guide you through every step.
Make sure your legacy crosses borders safely and tax-efficiently. Contact FinGlobal today for expert help with cross-border estate and tax planning.