Legal Articles

Deceased Estate Taxation on Income and Assets

Laws regarding tax for deceased estates are regulated by section 25 of The Income Tax Act of South Africa.

Just as we are liable to pay taxes on income, purchases and other transaction made throughout our lives, there are taxes for deceased estates too.

We are taxed on our material wealth such as property, vehicles and other personal assets as well as on certain investments made such as life insurance.

Tax for Deceased Estate According to The Income Tax Act

When a person passes away, all his assets are disposed of by his executor of estate to the total market value at time of death.

The executor of the estate is required to register for a second income tax number after the date of death for any person who passed away after the 1st of March 2016.

This also applies to cases where the executor had received disposals or acquisitions of assets belonging to the deceased estate after the date of death.

Furthermore, the executor must register the deceased estate for Value Added Tax as there may be VAT implications if the deceased person was registered as a VAT vendor before death.

Income Tax After Death – Estate Duty South Africa

The executor of estate will be responsible for managing the taxation on all the income earned and accrued by the deceased person up until the date of death.

Then, the executor sets up and administers this newly registered taxable entity of behalf of the deceased while acting as the deceased person’s representative.

Once the estate has been set up, a dutiable amount will be levied against the estate at a flat rate of 20%.

Should the estate be worth more than R30 million, a flat rate of 25% will be levied.

Once the allowed deductions, applicable tax rebated and estate duty to be recovered by the beneficiaries have been calculate, a dutiable amount is calculated by deducting the R3.5 million initial abatement from the nett value of the estate.

The value of all the assets included in the deceased’s estate which is acquired by the surviving beneficiaries can be deducted to the extent that it’s included in the property.

Capital Gains Tax Deceased Estate South Africa

Beneficiaries are not required to pay capital gains tax when they acquire their inheritance. However, should they sell their inheritance, they will then be liable to pay capital gains tax.

Van Deventer & Van Deventer Incorporated – Property Attorneys in South Africa

We provide comprehensive legal services related to property law as well as estates, trusts and wills.

For more information about tax for deceased estate, feel free to contact our attorneys in Cape Town and Johannesburg.