Inheritance issues to know if you are a non-resident (2024)

As with any estate issue, there are many factors to consider. Especially if you are not living in SA but due an inheritance from a South African estate.

A person who has no ties to South Africa would be considered a non-tax resident of South Africa. However, to prove your non-residency status to the executor of an estate, you will need to provide them with a copy of your passport (with proof of exit stamp), visa, documentary proof that you are paying tax in a foreign country, and a letter from your former banking institution confirming that you have formally emigrated.

Many South Africans assume that they are non-residents when they have been living abroad for many years. However, from a regulatory standpoint, this is not the case. You are only a non-resident taxpayer when you have formally emigrated through the tax migration process, which was recently introduced by the South African Revenue Service (Sars).

If you have not formally emigrated or undergone a tax migration since the implementation of the new regulations on 23 February 2022, you will still be regarded as a South African resident. This means you are still restricted by South African exchange controls and are only allowed to repatriate your annual Foreign Capital Allowance (FCA) of R10 million (whilst also needing to obtain an Approval for International Transfer, formally known as a tax clearance certificate) or R1 million Single Discretionary Allowance (SDA). The process of applying for these allowances has become extremely onerous since the new regulations came into effect.

In the event that you are still regarded as a SA resident for tax purposes and set to inherit more than R11 million, it is possible to also externalise more than the R11 million in allowances by applying to the South African Reserve Bank (Sarb)for a special approval which is a two-step process. What is most important is that if you were ever a SA resident, you must retain your green barcoded ID or smart card, as this document will be requested, no matter how long you have been living abroad, unless you are able to prove that you have formally emigrated. In the event that you are not in possession of a green barcoded ID, you will be required to apply for a smart ID card due to the SA exchange control regulations.

Non-resident inheritances in South Africa

If you are a non-resident inheriting money from a South African estate, there are a few things you need to keep in mind:

• You may be required to pay tax on the inheritance in the country where you are a resident unless there is a double taxation agreement between South Africa and that country.
• You may need to obtain an Approval for International Transfer from Sars before you can transfer the inheritance funds out of South Africa if the amount is larger than R1 million.
• You may need to pay exchange control fees when you transfer the inheritance funds out of South Africa.

The specific requirements for non-resident inheritances in South Africa will depend on your individual circ*mstances. If you are a non-resident inheriting money from a South African estate, it is important to speak to a tax advisor to get specific advice on your situation.

Here are some additional details that may apply to you:

• If you have no ties to South Africa (meaning you were not born nor reside in South Africa), the process is simple. A bank account will be opened in the name of the estate, and funds will be transferred into the non-resident’s elected foreign banking account.
• If you were born in South Africa or residing overseas but have not formally emigrated or tax migrated, a South African Temporary Abroad account will need to be opened in your name, and you will be subject to the exchange control restrictions before inheritances may be transferred to you.
• If you were born in South Africa and do not hold a valid barcoded ID document, and have not tax migrated, you will be required to obtain a barcoded ID. This will then allow you to externalise your inheritance by utilising your R1 million and R10 million allowance. Sarb clearance will be required for inheritance values greater than R11 million.

Inheriting offshore assets as a South African resident also has implications.

Before 23 February 2022, a SA resident had to declare offshore inheritances to the Sarb in order to note that their annual allowance was not utilised. This has now changed because of CRS (Common Reporting System). A system that is in place between various countries, allowing Sars to easily pick up that you own/inherited an offshore asset. What is important to note is that if the inheritance of an offshore asset fell before this date, the beneficiary is still required to request approval from the Sarb in order to receive this inheritance or keep it in their name.

In the event that you did not report any asset that was inherited, penalties may be imposed on you by the Sarb. You may also face some difficulties in remedying the problem in later years.

It is important to consult with a tax advisor and an exchange control specialist to understand your specific obligations and to ensure that you comply with all applicable laws and regulations.

* Article written jointly with Malissa Conlin, Admitted Attorney, FPSA®, general manager of Brenthurst Wealth and fiduciary, legal and compliance executive malissa@brenthurstwealth.co.za