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GOING GLOBAL:
WHAT ARE THE TAX IMPLICATIONS?
Complications around both local and offshore taxes could impact the eventual returns of your offshore investments. In the second in a series of three webinars focusing on what you need to know before going global, we set out the factors you should into account when structuring your taxes as part of your overall wealth strategy.
You can watch a recording of the webinar here:
In a nutshell, the most important duties and taxes that may impact your offshore investments, are:
South African estate tax: In SA, this tax is paid by the estate of the deceased in the form of estate duty. The beneficiary inheriting the funds generally has no liability to pay the tax, as the estate has already paid it. The estate duty rate is 20% on the dutiable amount for estates up to R30 million, and 25% for anything above R30 million.
Foreign inheritance tax: Most countries have their own inheritance and estate duties or taxes, and a South African resident owning a foreign asset may be subject to these. For example, the UK and US apply rates of up to 40% on assets located in these countries. Depending on whether an estate duty double taxation agreement is in force with SA, the rates levied in the foreign jurisdiction may be in addition to the SA estate duty. Where such an agreement is in force, the higher rate of the foreign jurisdiction will typically apply, with SA giving a credit against the SA estate duty payable, limited to the amount that would have been payable in SA.
SA donations tax: Levied at a flat rate of 20% on the value of the property donated. However, donations exceeding R30 million are taxed at a rate of 25%. Section 56(1) of the Income Tax Act contains a list of exempt donations, including those between spouses, and donations to approved public benefit organisations. An annual exemption applies on the first R100 000 of property donated.
Another factor to consider is probate – the process in which a will is ‘proved’ in a court as a valid public document and accepted as the true last testament of the deceased. Probate will generally be required in the jurisdiction in which an asset is held. If the country in question doesn’t recognise a South African will or executor, this can be a time-consuming and costly affair. An offshore will is therefore sometimes required to simplify the process.
At Sanlam Private Wealth, we have all the key skills in place to assist you and your family on your offshore investment journey, from start to finish. We can provide world-class advice and integrated onshore-offshore wealth management solutions – if you need further information, please don’t hesitate to contact us at info@privatewealth.sanlam.co.za.
Expert advice is crucial in dealing with cross-border estate and tax planning.
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