The question of whether assets you hold abroad will be subject to estate duty in South Africa is important, especially now that residents are permitted to invest offshore.
In South Africa you will pay 25 percent estate duty on the value of assets held by the deceased person which exceed R1 million, after taking into account all the exemptions and deductions allowed.
For a South African resident, all assets, regardless of where those assets are in the world, must be brought into the calculation. There is, however, an exemption for assets that you acquired prior to becoming a resident in South Africa for the first time.
What is vital in interpreting this exemption is that the assets must have been acquired before you became a resident for the first time. If you emigrated and later returned to South Africa and you acquired the assets while you were outside South Africa, the exemption does not apply. The assets would fall into your South African estate.
The exemption also extends to assets you may have acquired after becoming resident for the first time (or even if you have never been a non-resident), through a donation from a person who was not a resident when the donation was made, or out of an inheritance from a person who was not resident in South Africa on death.
It also extends to assets acquired out of the profits from the proceeds of those assets.
In short, if a non-resident bequeathed or donated non-South African assets to you which have been left offshore, even if you have sold the original asset and have reinvested the proceeds in another asset, you will not pay estate duty on it.
Another question which often arises is whether donations tax is payable if assets, which are held offshore, are donated.
As a South African resident you will pay donations tax of 25 percent for donations over R25 000 a year, unless a specific exemption exists. But you will not be liable for donations tax if you donate assets which are situated outside South Africa if:
* You acquired the assets before you became resident in South Africa for the first time;
* You inherited the assets from someone who was not resident in South Africa when they died;
* The assets were donated to you by someone who was not resident in South Africa when they made the donation;
* You acquired the assets out of funds which you derived from carrying on a trade outside South Africa; or
* The asset is immovable property which you acquired more than 10 years before you made the donation.
South Africa has some interesting tax rules relating to offshore assets, and it's important to know where you stand.