Don’t leave your assets to fate; this guide explains inheritance tax in South Africa and the law of succession, as well as what happens when someone dies without leaving a will.
If you relocate to South Africa and buy property or settle there long-term, it’s important to understand South African inheritance laws and tax. As a foreigner, it may be necessary to write a will in South Africa to protect your assets.
This guide explains applicable inheritance laws in South Africa as well as the rates of inheritance tax in that can apply. Sections include:
- South African inheritance law and succession rules
- What if there is no will?
- South African inheritance tax
- Paying inheritance tax in South Africa
- Succession law for foreigners
- Reducing your inheritance tax in South Africa
- Useful resources
South African inheritance law and succession rules
Inheritance law in South Africa applies to everyone who owns property in the country. Law of succession in South Africa consists of three parts:
- the Administration of Estates Act 1965, which regulates the disposal of deceased estates in South Africa;
- the Wills Act South Africa 1953;
- the Intestate Succession Act 1987, which applies in instances where the deceased did not leave a will.
The law of succession in South Africa generally allows residents to dispose of property as they wish with minimal restrictions, if they draw up a will. The main limitation is that if the surviving spouse has been excluded in a will and they are unable to maintain themselves, they can make a claim on the deceased estate through the Maintenance of Surviving Spouses Act.
If there is no surviving spouse or dependents, the estate is divided among parents and/or siblings or, if none, the nearest blood relatives.
The South African Revenue Service (SARS) provides more information on the law of succession in South Africa.
Inheritance law on pensions in South Africa
If the deceased was receiving or set to receive a pension, they’d usually have recorded the beneficiaries of their retirement fund; the pension is usually included within the overall value of the estate.
As a loved one, it’s in your best interests to hire an expert to help you understand your options. This is because questions like whether you should receive the pension in the form of a lump sum, or an annuity, affect your tax concessions and rates, so be sure to make an educated decision.
What if there is no will?
When an individual dies without a will in South Africa, the estate is distributed according to the Intestate Succession Act. Intestate succession in South Africa allows for an estate to be divided between a surviving spouse and children, with the surviving spouse receiving at least R250,000 or a child’s share, whichever is greater.
If spouses marry in community of property (i.e., they were joint owners) then one half of the estate goes to the surviving spouse and the other half is distributed according to the laws of intestate succession in South Africa.
In the event that you don’t leave a will in South Africa and have no immediate relatives among whom your estate can be distributed, the estate is then divided between the nearest blood relatives as per the Intestate Succession Act. If the deceased leaves behind no blood relatives and no will, the estate will become the property of the state.
South African inheritance tax
South African inheritance tax, or estate duty, applies to all estates valued above a certain amount. In addition, estates of the deceased may be subject to capital gains tax and donations tax.
Estate duty in South Africa applies to estates worth more than R3.5 million. Beyond that, the tax rates are as follows:
- R3,500,000 – R30,000,000 – 20%
- R30,000,001and above – 25%
Capital gains tax
Capital gains tax is payable before the transfer of the estate to any beneficiary, so beneficiaries do not pay capital gains tax. Acquiring an asset is not subject to capital gain tax at the time of inheritance, and any capital gain or loss is only worked out when the asset is sold or disposed of.
If the deceased donated property or assets during their lifetime, a donations tax of 20% applies for properties valued up to R30 million. However, the exemption threshold is much lower, at R100,000.
Paying inheritance tax in South Africa
According to the law of succession in South Africa, inheritance tax is payable within one year from the date of death, or 30 days from date of assessment if you complete the assessment within one year of the death date. If you don’t meet these deadlines, an interest rate of 6% on late payments may be charged.
Fortunately, The South African government has agreements to avoid double death duties with Botswana, Lesotho, Swaziland, Sweden, the United Kingdom, the United States, and Zimbabwe.
Succession law for foreigners
Both residents and non-residents pay estate duty in South Africa at the same rate. The main difference is that residents pay estate duty on their worldwide assets whereas non-residents only pay estate duty in South Africa on property and assets located in the country.
However, properties located outside of South Africa are exempt if they were acquired prior to residency or were inherited from or donated by someone who is not a South African resident.
There are no restrictions on buying property in South Africa by non-residents. Foreigners who acquire immovable property in South Africa, either through purchase or inheritance, need to register their ownership with the Registrar of Deeds where the property is located.
Foreigners should ensure that their title deeds are marked as non-resident so that they can repatriate the proceeds if they sell the property.
Reducing your inheritance tax in South Africa
Because the succession laws in South Africa are fairly straightforward, you’ll likely have to pay the required taxes if your estate value is within the taxable thresholds. If you have questions specific to your financial situation, though, you should seek professional help to walk you through your options.
South African Revenue Service (SARS) – tax authority in South Africa