Key terms of an inheritance . . .
When a person (taxpayer) dies, that person is called a ‘deceased person’ and all his or her assets on the 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 among other things include immovable property (e.g. a house), movable property (e.g. a car, furniture, etc), or cash in the bank.
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.
Do I need to pay tax on assets or money I inherited?
No, an asset inherited is a ‘capital receipt’ and is therefore not included in the taxpayer’s gross income.
Therefore, in South Africa, there is no tax payable by a person who receives an inheritance. Capital Gains Tax (CGT) is also not payable by the recipient of an inheritance.
Are donations different from an inheritance?
Yes, for tax purposes, donations are treated differently. They have not changed in recent years but are subject to change annually in the budget speech.
Donations tax is levied at a flat rate of 20% on the cumulative value of property donated since 1 March 2018 not exceeding R30 million, and at a rate of 25% on the cumulative value since 1 March 2018 exceeding R30 million.
The first R100 000 of property donated in each year by a natural person is exempt from donations tax.
In the case of a taxpayer who is not a natural person, the exempt donations are limited to casual gifts not exceeding R10 000 per annum in total. Dispositions between spouses, South African group companies and donations to certain public benefit organisations, are exempt from donations tax. (SARS website directly)
Please contact us with any questions you may have.