Where a person was ordinarily resident in South Africa, his worldwide assets will form part of his estate subject to any double tax agreement which South Africa may have with the country where the asset is situated.
Where the asset is situated in South Africa, the asset will generally attract estate duty irrespective of where the owner was resident at death.
Estate duty is charged at 20% on the value of a person’s nett estate exceeding R3.5million. The nett estate consists of all property (eg. assets such as immovable property, vehicles, investments etc.) and deemed property (eg. policies upon the life of the person with certain exceptions) of the deceased after deduction of liabilities, bequests to public benefit organisations and bequests to a spouse.
Estate duty has been levied at the rate of 20% but from 1 March 2018 there will be an increase in the rate payable in respect of dutiable estates above R30 million.
The estate duty rates from 1 March 2018 are as follows:
| Taxable Estate | Rate of Estate Duty |
| R0 – R30 000 000 | 20% of each R1 |
| R30 000 001 and above | R6 000 000 + 25% of nett estate above R30 000 000 |
Example:
A person with a nett estate of R50 000 000(after deduction of liabilities and bequests to a spouse):
- Death before 1 March 2018
| Nett Estate | R50 000 000 |
| Less exemption | R3 500 000 |
| Dutiable estate | R46 500 000 |
| Estate duty @ 20% | R9 300 000 |
- Death after 1 March 2018
| Nett Estate | R50 000 000 |
| Less exemption | R3 500 000 |
| Dutiable Estate | Dutiable Estate |
| Estate duty R6 million + 25% of amount above R30 million | R10 125 000 |
To limit the donations made in an attempt to avoid paying the increased estate duty, donations tax has also been increased from 1 March 2018.
The first R30 000 000 donated in a tax year will be taxed at 20% and the amount above R30 000 000 will be taxed at 25%.
Every natural person is entitled to donate R100 000 annually and a donor other than a natural person is entitled to donate R10 000 annually without attracting donations tax.
The donations tax rates are as follows:
| Taxable donation | Rate of donations tax |
| R0 – R30 000 000 | 20% |
| R30 000 001 and above | R6 000 000 + 25% of taxable amount above R30 000 000 |
Example:
A natural person donates R50 000 0000 in a tax year:
R50 000 000 – R100 000 annual donations tax exemption for a natural person =
R49 900 000 taxable donation
Before 1 March 2018:
| R49 900 000 @ 20% donations tax | R9 980 000 |
After 1 March 2018
| R30 000 000 @ 20% | R6 000 000 |
| R19 900 000 @ 30% | R5 970 000 |
| Total donations tax | R11 970 000 |
Conclusion: It is of extreme importance to have a proper estate planning report done by a professional competent person to ensure that you are aware of all the costs and tax implications which may arise upon your death.
*a person who considers South Africa as his/her home to which that person would return
Disclaimer
The material is not intended as and does not constitute financial or any other advice.
The material does not take into account your personal financial circumstances. For this reason it is recommended that you speak to an accredited broker or financial adviser to consider all your options and draw up a plan to achieve your financial goals.
Karen van der Poll, CFP® LLB, Adv PG Dip in Fin. Plan, Legal Advisor at Old Mutual Personal Financial Advice in the Western Cape.
