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TAX ON INHERITANCE, DONATIONS AND A DECEASED ESTATE

In 2018 the Estate Duty rate increased from 20% to 25% on dutiable amount of estates of more than R30 million.
When a person dies, the deceased person and all his or her assets on date of death will be placed in an estate.

This estate is called an estate of a deceased person. Assets in a deceased estate can amongst other things include immovable property such as a house, movable property such as cars and furniture, etc. and funds in the bank to name a few.

The estate is administered by an Executor. Once the Executor has finalised all the administration in the deceased estate, the remaining assets (after paying all the debts) will be distributed to the beneficiaries.

A beneficiary can consist of either heirs and/or legatees (someone to whom an asset was left by the deceased). The heir receives the balance of the estate.

An asset inherited is a capital receipt and is not included in the taxpayer’s gross income.
In South Africa, there is no tax payable by a person who receives an inheritance.

Note that donations and gifts are treated differently to inheritances.

For resident individuals, donations are subject to Donations Tax of 20% on the first R30 million of donations made during a tax year and then at the rate of 25% on donations exceeding R30 million, with an annual exemption of up to R100,000 of the value of all donations made during the tax year. For companies or trusts, the exemption for casual gifts is up to R10,000 per tax year.

Where the donor donates property to a recipient, and the donor fails to pay the Donations Tax, the recipient and donor will be jointly and severally liable for the tax. Note: if you inherited a house there is no tax on the inheritance, however the value of the house on the day you inherited it will be the base cost for Capital Gains Tax purposes.

Some donations are exempt such as donations between spouses and donations made to certain public benefit organisations.

The three main Laws governing inheritances in South Africa are:
• The Administration of Estates Act, which regulates the disposal of the deceased’s estate in South Africa;
• The Wills Act, which affects all testators with property in South Africa;
• The Intestate Succession Act, which governs the devolution of estates for all deceased persons who have property in the Republic and who die without a will.

The South African government has agreements with some countries to avoid double taxation in relation to estate duty.

Author Craig Tonkin

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