20 October 2021 – The Commissioner must approve the valuation of shares held by the deceased person in unlisted companies/close corporations or shareblock companies at the time of death. For the valuations to be done, valuation packs together with the Valuation Pack Checklist, must be provided to the Share Valuations Team at the following address [email protected]. For more information, scroll down to the Share Valuations paragraph.
- 19 February 2021 – Estate Duty Implications on Key Man Policies – External Guide
- 6 August 2020 – Frequently Asked Questions (FAQs) for deceased estates have been compiled on the basis of questions that executors and the public at large have about the tax treatment of deceased estates.
When a natural person (taxpayer) dies, that person is called a ‘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 (commonly known as a ‘deceased estate’). Assets in a deceased estate can amongst other things include immovable property (house), movable property (car, furniture, etc), cash in the bank, etc. The person who administers a deceased estate is called 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. A legatee is a person who receives a specific asset from the deceased estate. An heir is a person who receives the balance of the estate (that is, after all disposals to a legatee are finalised).
What is Estate Duty?
Estate Duty is levied on the worldwide property and deemed property of a natural person who is ordinarily resident in South Africa and on South African property of non-residents. Various deductions under section 4 of the Estate Duty Act, 1955 are allowed to determine the net value of the estate. An abatement of R3.5 million is allowed against the net value of the estate to determine the dutiable value of the estate. The Estate Duty is levied on the dutiable value of an estate at a rate of 20% on the first R30 million and at a rate of 25% on the dutiable value of the estate above R30 million.
The determination of Estate Duty can be summarised as follows –
|All Property of the deceased person at date of death||RXXX|
|Property deemed to be property of the deceased estate at date of death||XXX|
|Gross value of the deceased estate||XXX|
|Less: allowable deductions||(XXX)|
|Net value of the deceased estate||XXX|
|Less abatement amount||(3 500 000)|
|Estate Duty calculated on the dutiable amount||XXX|
|Estate Duty payable by the deceased estate||(XXX)|
|Estate Duty payable by beneficiary (if applicable)||(XXX)|
All income received or accrued before the deceased’s death is taxable in the hands of the deceased person up until date of death, and will be administered by the executor or administrator acting as the deceased’s representative taxpayer. After the date of death, the deceased estate comes into existence. The assets of the deceased person will be held by the deceased estate until the liquidation and distribution account has lain for inspection and become final under section 35(12) of the Administration of Estates Act, after which the assets will be either handed over to the heirs or delivered to the trustee of a trust estate.
Income, which accrues to the estate after the death of the deceased but before the distribution of the assets to the beneficiaries, is dealt with under section 25 of the Income Tax Act.
Who is liable for Estate Duty?
It is normally the responsibility of the Executor to pay the duty as levied on the property of the deceased. However, there are instances in which the estate duty is payable directly by the person who is receiving the property. For example, where a policy is payable directly to a beneficiary, the Estate Duty attributable to such policy is payable by the beneficiary (in other words, this portion of the Estate Duty will not be paid by the deceased estate).
When is Estate Duty due?
Estate Duty is due within 1 year of date of death or 30 days from date of assessment, if assessment is issued within 1 year of date of death. Currently, interest is levied at 6% p.a. on late payments.
Who is responsible for collecting Estate Duty?
SARS is responsible for collecting the Estate Duty. For more information on Estates, please refer to the Estates webpage.
How do I report or register a deceased estate to SARS?
Even if Estate Duty is not payable you have to inform SARS that the person is deceased.
There are two options at this stage to report a new Estate Case to SARS:
- By sending an email to the SARS email addresses or
- by sending it through the new SARS Online Query System.
In order to report a new Estate Case to SARS, it is important that the correct Supporting Documentation be submitted to SARS. Refer to our FAQ on what is required to report the new Estate to SARS.
Also see our FAQ on Deceased Estates for more information on how to register a Deceased Estate.
How do I declare Estate Duty?
The executor will calculate the Estate Duty payable when preparing the liquidation and distribution account. The executor must complete the Estate Duty Return (Rev267) and must submit the return, together with the liquidation and distribution account to the Master of the High Court as well as to SARS.
The Commissioner must approve the valuation of shares held by the deceased person in unlisted companies/close corporations or shareblock companies at the time of death.
- Emails should be kept to a size of 2MB per email. Emails should be numbered if send in batches to allow SARS to verify that all emails are received.
- Shares/ members’ interests that are bequeathed to the surviving spouse and not sold by the estate, would no longer be required to be approved by SARS. (This will only be the case if the full portion of the shares/members’ interest that the deceased person held is bequeathed to the surviving spouse in terms of an approved Will or intestate succession. Should any portion go to another heir or the spouse obtains it in terms of a re-distribution agreement, then approval by SARS will be required.)
The requirements for each type of valuation pack are as follows:
Ordinary shares/Member’s interest
- Valuation of the shares/member’s interest.
- Should the shares be in a holding company of a group, then the consolidated financial statements should also be included.
- The annual financial statements as close as possible to date of death.
- The annual financial statements for the 2 years prior to date of death.
- Copy of the letter of executorship, (as well as a letter indicating authority to deal with SARS in this regard or power of attorney given by the executor/executrix.)
- Contact details of the executor/executrix.
- If there is fixed property in the company/close corporation, then a REV246 form needs to be completed and attached.
- If Patents in a company/close corporation, then a valuation thereof should be attached.
- Copy of the Memorandum, Articles and other documents that sets out the rights attached to the preference and other shares of the company.
- Copy of the financial statements of the company as close as possible to the date of death.
Please note that loan accounts are not approved by SARS and should be submitted to the Master of the High Court only.
Double taxation on estate duty
Double taxation may arise if the same assets of the deceased person are subject to Estate Duty in South Africa as well as the equivalent thereof in the foreign country. South Africa has entered into Estate Duty agreements, to avoid double taxation on Estate Duty, with the following countries: The United States of America, the United Kingdom, Zimbabwe and the BLS Countries (Botswana, Lesotho, Swaziland). For more information, click here. Where double taxation on Estate Duty arise and no Estate Duty agreement exists between South Africa and the foreign country, relief for the double taxation must be sought under domestic rules.
Estate Duty queries may be directed to: SARS Call Centre at 0800 00 7277 or via e-mail to [email protected].
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