How is estate duty charged on property? | Legal Articles


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How is estate duty charged on property?

According to the Estate Duty Act, estate duty is charged on the dutiable value of a property. The rate in South Africa is currently 20% of the estates dutiable value.

Should a person be habitually residing in the country at the time of death, then all the assets and deemed property (wherever situated) of said person will be added to the estate’s value and the duty will then be calculated. 

Estate duty - Conveyancing Attorneys Johannesburg

South African property belonging to foreigners and non-residents will also be liable for estate duty fees. 

For you to be able to calculate your estate duty, you need to determine which property is included, or is considered deemed property.

What is considered deemed property? 

The types of property include all property, or right to property that is immovable or movable property whether it is tangible or intangible. 

Certain annuities, options to purchase land or shares, the goodwill of a company, and intellectual property are also considered property. 

The deemed property is subject to estate duty; however the rate can be reduced, or the property won’t be added to the estate’s value if certain conditions are met. 

Such property include:

Insurance policies 

Benefits that are payable by pensions, retirement annuity etc. because of the death of a person. It is worth mentioning that since 1 January 2009, these funds have been excluded from the estates value and aren’t subject to estate duty.

Donations given at the time of death of the donor are subject to estate duty, however, they are excluded from donations tax.

Accrual claims made against the estate of the surviving spouse are added to the deemed property of the deceased.

Any property which was disposed of by a competent person before he or she died such as when an asset is donated to a trust. 
Lastly, you should also figure out which deductions are allowed during the calculation of estate duty. The important deductions include funeral expenses and other amounts such as debts and tax liability which are due at the time of death.

Foreign Assets

Foreign assets and rights that were held by the acquired before the deceased first became a habitual resident in South Africa are added to the allowed deductions. 

This includes inheritances or donations from a non-resident which were also acquired before habitual residence took place. 

If there were any amount owed to a non-resident which doesn’t exceed the assets located outside of the country and that were excluded from the dutiable estate - these amounts are deductible. 

Any property which was bequeathed to certain public benefit organisations and property that is accrued to a surviving spouse are made deductible. However, these will not be deductible if they are subject to a bequest price. 

Also, if the bequest is to a trust established by the deceased in order to benefit the surviving spouse, and the property or income can be given to someone else at the trustee’s discretion then this will also not be deductible. 

According to Section 4(q) of the Estate Duty Act, if the trustees are not afforded such right then the deduction will be allowed.

There is a roll over amount of R3.5 million that is granted to the surviving spouse. This amount can then become R7 million at the time of death of this spouse. 

However, this portability of the deduction amount only applies if the surviving spouse is left the entire value of the estate of the first dying spouse. 

Finally, any proceeds from life assurances will be liable for estate duty.

Van Deventer & Van Deventer Inc. - Attorneys Johannesburg

At Van Deventer and Van Deventer Incorporated, we will guide you or your loved ones through the process, from reporting the estate to the Master of the High Court, through to exacting procedures prescribed by law, to the final distribution of the estate to the beneficiaries. 

And we will do so in an efficient, yet empathic manner.

Contact us to assist you in these complex and demanding matters, so that you have the benefit of our client-focused expertise when you need it the most.

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