Inheritance tax in South Africa: A complete guide

Moving or retiring to South Africa from the UK? If you’re going to live there permanently, you’ll need to have at least some understanding of local tax laws and how they apply to you.

One potentially complicated area of tax law in any country is inheritance. This can be useful to know about if you might receive an inheritance from a South African relative, or if you plan to retire to the country and see out your days there.

It’s important to understand your obligations, organise your affairs properly and make sure your beneficiaries don’t pay too much tax unnecessarily.

We’re here to help, with an essential guide to inheritance tax in South Africa. We’ll cover rates, allowances, exemptions and how the tax is calculated in the country.

We’ll also show you how to send large amounts of money securely between countries using the Wise Account. This can be extremely useful if you have inheritance tax to pay, or want to send money from an inheritance back to the UK.

Learn more about the Wise account

What is inheritance tax?

Inheritance tax, known as IHT in the UK, is a tax paid to the government on the estate of someone who has died. The ‘estate’ usually encompasses all property and possessions, as well as savings, investments and pensions.

Many countries have inheritance tax systems. Depending where in the world you are, the tax may be known as estate tax, inheritance tax or succession tax.

However, not all countries have this kind of tax in place. Australia, Singapore, Sweden and Norway are among a handful of countries which don’t charge inheritance tax at all.¹

Inheritance tax in South Africa

In South Africa, inheritance tax is known as ‘estate duty’. This is a tax levied on the estate of a deceased person.

It works similarly to the inheritance tax system in the UK, where the tax is due as a lump sum on estates over a certain total value. In South Africa, the executor of the deceased person’s estate will organise the payment of estate duty.²

This is different to some other systems, such as in EU countries, where it is the individual beneficiaries who have to pay the tax on their share of the inheritance. However, there are some circumstances in South Africa where beneficiaries will need to pay taxes, rather than it coming out of the estate.

The law and related processes are overseen by the South African Revenue Service (SARS), which is the main tax authority in South Africa.

Who pays inheritance tax in South Africa?

Under South African inheritance tax laws, both residents and non-residents are liable for estate duty. The rates are the same too.³

However, there is a key distinction between the two groups, which you’ll need to know as a UK expat.

Legal residents of South Africa are liable for estate duty on assets held worldwide. This means property and other assets located in other countries (such as the UK, for example).³

There is an exception to this, however. For properties outside of SA, there’s an exemption from tax if the property was bought prior to residency or gifted/donated by someone who is not a South African resident. ³

For non-residents, they only are liable for estate duty on assets and property based within South Africa.³

So for example, if a South African citizen living in another country passes away, only their home or other assets based back home in South Africa will be liable for estate duty under the country’s laws - not the property they hold in their new country.

It’s important to get professional tax advice to double check which country’s tax laws apply to you, especially if you live between countries or have property in multiple countries.

Inheritance tax rates in South Africa

Some countries charge inheritance tax in progressive bands according to the value of the inheritance and the relationship of the beneficiary to the deceased. But in South Africa, it’s much simpler.

The first R 3.5 million ZAR of the estate is tax-free. Anything above that is subject to estate duty at the following rates:²

Value of the estate	Inheritance tax rate
R 3.5 million to R 30 million	20%
R 30 million+	25%

Taxable assets and exemptions

According to South Africa’s inheritance tax laws, all property and assets are considered to be taxable assets. This includes real estate, vehicles, possessions, money and savings, investments and business interests.

If the deceased person was a legal resident of the country, this includes their worldwide assets.

It may be possible to claim deductions or exemptions in certain circumstances, such as:⁴

• Property left to surviving spouses
• Donations to registered public benefit organisations
• Bequests to children under 18 years old.

However, you’ll need to speak with a tax expert (specialising in South African tax law) to find out more about whether you’re eligible for any of these - and how to claim them. You can also contact the South African Revenue Service (SARS) for more information.

How to calculate inheritance tax in South Africa

Here’s an overview of how South African inheritance tax can be calculated:

1. The taxable net asset is calculated, by minusing the liabilities (debts) from the value of the inventory of assets.
2. Any allowable deductions are taken off the total.
3. If the value is above the tax-free allowance of R 3.5 million, the executor will need to pay estate taxes on that amount. For values between R 3.5 million and R30 million, the rate is calculated at 20%. For anything above this, the rate is 25%.²
4. Once estate taxes are paid, the estate is then distributed between heirs, according to the stipulations of the will of the deceased person.

How to pay inheritance tax in South Africa

Estate taxes in South Africa are typically paid by the legal executor of the estate, using funds from the estate itself.

They’ll need to complete an Estate Duty Return (Rev267) and must submit it along with other required documents to the Master of the High Court and the South African Revenue Service (SARS).²

Any estate taxes due must be paid within one year from the date the person died. Alternatively, within 30 days of the estate being assessed (as long as this is within one year of the date of death). If the payment is late, there’s a rather hefty 6% interest rate to pay as a penalty.²

You’ll need to contact the tax authority to find out about available payment methods.

If you’re living in the UK or another country, a solution such as Wise could be ideal for sending a payment for inheritance tax to South Africa. You can send money worldwide with Wise, for low fees* and mid-market exchange rates. There’s even a dedicated service for securely sending large amounts.

Wise - For big money transfers at life’s big moments

After reading this, you should have a better idea of how the South African inheritance tax system works - and how it applies to you and your family. We’ve looked at personal allowances, rates, exemptions and who has to pay the tax.

We’ve also covered how to pay inheritance tax in South Africa. If you need a way to pay inheritance tax, send inherited money back to the UK or generally manage your finances between countries - Wise is the perfect solution.

With Wise, you can hold and convert between 40+ currencies in your online account. And you can send money worldwide for low, transparent fees* and mid-market exchange rates.

If you’re sending a large sum between countries, read our quick guide on what documents you’ll need. Whether you’re paying foreign bills or trying to get the best exchange rates when repatriating funds from overseas back to the UK, your Wise account can do it all.

FAQs about inheritance tax in South Africa

Below are some of the most frequently asked questions:

Do the UK and South Africa have a double taxation treaty for inheritance tax?

Yes, the UK and South Africa have a double taxation treaty in place. This is designed to ensure that expats don’t pay tax twice on income. According to the South African Revenue Service (SARS), this treaty extends to estate taxes too.²

How to avoid inheritance tax in South Africa?

There aren’t many things you can do to avoid or reduce the amount of inheritance tax payable on an estate. But it’s good to know that the tax liability is limited to estates valued at over R 3.5 million. This should mean that for many people, no tax at all will be payable.

How does inheritance work in South Africa?

The inheritance and succession laws in South Africa work in a similar way to the UK, on the basis of testamentary freedom. This means that whatever the person stipulates in the will as to the distribution of the estate will be carried out, with a few exceptions and provided the will is valid.

This is different to how it works in some other countries, such as France, Spain and some other European nations. These countries operate on the basis of forced heirship, where close relatives such as spouses and children are automatically entitled to a share of the deceased person’s estate, regardless of what it says in the person’s will.

Which countries have no inheritance tax?

Many countries worldwide have no inheritance tax system, although other systems such as stamp duty or transfer tax may be used instead.

Here are just a few of the countries which don’t have inheritance tax:⁵

• India
• Singapore
• Mexico
• Estonia
• Malta
• Sweden
• Austria
• Norway
• Canada
• Slovakia
• Liechtenstein
• UAE
• Hong Kong
• New Zealand
• Saudi Arabia.

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Sources used:

1. The Telegraph - The countries that abolished inheritance tax – and are now booming
2. South African Revenue Service - Estate Duty
3. Expatica - Inheritance and estate taxes in South Africa
4. Go Legal - Death and taxes – You can’t escape either
5. Lorenz Partners - List of countries with no inheritance tax

Sources last checked on date: 22-Aug-2024