LEAVING A LEGACY FOR BENEFICIARIES LIVING OVERSEAS
Fiduciary and Tax
Head of Fiduciary and Tax
Nov 09, 2023
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To transfer wealth from one generation to the next, comprehensive estate planning is essential, especially if your children have moved overseas. This includes complying with new South African Revenue Service (SARS) requirements for transferring funds abroad. It’s therefore crucial that both you and your beneficiaries have regularised your affairs with SARS – here’s what you need to know.
In April this year, SARS introduced changes to the procedure for transferring more than R1 million out of South Africa, referred to as the Approval International Transfer (AIT). This replaced the foreign investment allowance and emigration tax compliance status application types.
In terms of estate planning and ensuring you can leave an accessible legacy to your offshore beneficiaries without complication, the following need to be considered:
If any of your children live abroad and have decided to settle there permanently, they must ensure they have placed their cessation of tax residency with SARS on record.
It’s important to note that the single discretionary allowance of R1 million and foreign investment allowance of R10 million are not available to persons who are no longer South African residents.
If their affairs with SARS are not in order, it may be challenging for your offshore beneficiaries to access their inheritance. In effect, this means they’ll first have to formally cease their tax residency with SARS and then apply to SARS through the new AIT process to transfer the funds abroad.
The executor of your estate will need to ensure compliance in terms of tax obligations to SARS, which includes the payment of all pre- and post-death taxes, and estate duty.
As part of the application to externalise funds to an offshore beneficiary, the following information and documents are required by SARS:
The date on which the beneficiary of your estate ceased to be a South African resident – SARS will require a Notice of Non-Resident Tax Status (a ‘non-resident confirmation letter’)
The name of the country in which the beneficiary is now a tax resident
Whether he or she is a beneficiary of a local or foreign trust – if yes, you need to provide the trust registration and tax numbers
Whether he or she has shareholding directly or indirectly in any legal entity (local or foreign) of more than 10% – if yes, the entity details must be provided
Whether he or she has existing loans to a trust (local or foreign) – if yes, the trust details must be provided
Relevant supporting documents showing the sources of the capital together with base costs, where applicable
The total value of the amount to be remitted offshore, which cannot be more than the value of the available funds
The details of the country to which your funds are being transferred
A statement of the assets and liabilities of your beneficiary, both local and foreign, for three years.
EXPERT ADVICE IS ESSENTIAL
Estate and tax planning have changed significantly over the past few years. There is no one-size-fits-all solution – your estate plan needs to be drawn up with your unique personal circumstances in mind. It’s therefore crucial to seek professional advice, especially if you have assets in multiple jurisdictions.
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