Tax and deceased estates — implications for children living overseas

Tax and deceased estates — implications for children living overseas

Children living abroad who have not officially emigrated might still be regarded as South African tax residents, which has implications when they inherit their parents’ deceased estate.

Question: I have children who are living overseas. They did not emigrate officially and are now citizens of the countries where they are resident. They have absolutely no assets in, or income from, South Africa, and have not had any since leaving South Africa.

What happens when they inherit from a South African parent’s deceased estate?

Answer: I suspect there are many children who fall into this category – they are living overseas, but do not realise that they are still regarded by the authorities as SA residents, as they have not broken their SA tax residency.

It is important to understand the difference between South African residents and non-residents.

SA residents

South African residents are taxed on their worldwide income, regardless of where it arose. They will also be liable for capital gains tax (CGT) on the disposal of all assets, no matter where they are in the world.

Non-SA residents

Non-residents are taxed on SA-sourced income only and will be liable for CGT only on the disposal of fixed property and property-rich shares in South Africa. They will not be liable for South African donations tax or estate duty.

Now, regarding the inheritance, if they have a barcoded South African ID, the process is actually quite simple. They could simply convert their South African inheritance into the currency of their choice and repatriate the funds using their annual discretionary allowance.

If, however, they do not have a barcoded ID, then they would need to apply to have themselves no longer regarded as being ordinarily resident in South Africa. This is probably a good course of action if they do not intend coming back to South Africa. It is always better to have certainty when it comes to finances than to follow a fingers-crossed approach and possibly create problems in the future.

They should have a chat with someone who specialises in this field to ensure that they get the right documentation together and understand the tax implications.

Some of the documents they would need would be a passport with an exit stamp from South Africa as well as a foreign residency tax certificate. They would also need the various Financial Intelligence Centre Act documents.

As I mentioned in an earlier column, they will be liable for CGT on the assets they own on the day before they broke their South African tax residency. If your children chose the date that they broke residency as the day they originally left South Africa, then there will probably not be any CGT payable. Just to be safe, they should speak to someone who can give them insightful advice. DM

Kenny Meiring is an independent financial adviser. Contact him on 082 856 0348 or at Send your questions to [email protected].

This story first appeared in our weekly Daily Maverick 168 newspaper, which is available countrywide for R35.



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