Estate planning is the cornerstone of financial security, ensuring that your assets are distributed according to your wishes while minimizing tax liabilities for your heirs. In South Africa, estate duty, is governed by the Estate Duty Act (“the Act”).[1]
To determine the dutiable value of the estate, an abatement of R 3.5 million is allowed[2] per deceased person, against the net value of the estate, and the difference thereafter, if any, is dutiable at a rate of 20% or 25% and payable to the South African Revenue Services (SARS).[3] Estates with a net value of R 3.5 million up to R 30 million are levied at 20% on the dutiable amount, while deceased estates exceeding R 30 million are levied at 25% on the dutiable amount.
For executors, trustees and beneficiaries, navigating the complexities of estate duty requires meticulous due diligence to ensure compliance with legal obligations and to optimise the estate’s financial outcome. A key provision in this framework is Sections 10(1) and 10(2) of the Act, which addresses the interest imposed and penalties, should estate duty not be paid to SARS timeously.
What is Estate Duty?
Estate duty is a tax imposed on the transfer of wealth from a deceased person’s estate to their beneficiaries. It applies to all assets owned by the deceased, whether foreign or local, save for assets that fall under exceptions, as set out in section 3(2) of the Act. This section excludes any immovable, movable and deemed property which is situated outside of the Republic of South Africa where the deceased was not ordinarily resident in South Africa at the time of their death.
Foreign Assets and Estate Duty in South Africa
In relation to foreign assets, section 4(e) of Act provides further clarity and relief. Section 4(e) stipulates that the value of foreign property may be deducted from the gross value of an estate for estate duty purposes if the property:
- Was acquired before the deceased became ordinarily resident in South Africa; or
- Was acquired after the deceased became ordinarily resident in South Africa by way of a donation from a person who is not ordinarily resident in South Africa; or
- Was acquired after the deceased became ordinarily resident in South Africa by way of an inheritance from a person who at the time of his or her death was not ordinarily resident in South Africa; or
- If the particular property was acquired out of the proceeds of any of the property mentioned above.[4]
It is important to note that, if any foreign asset is deemed property of the deceased in terms of the Act and is subject to estate duty, it does not necessarily mean that the foreign country in question may not charge estate duty in terms of their own legislation. It is always advisable to note such legislation to ensure accurate estate planning.[5]
Estate Duty in South Africa
The dutiable value of an estate is calculated by determining the gross value of all assets, subtracting allowable deductions under Section 4 of the Act (such as debts, funeral expenses, and bequests to a surviving spouse), and applying a R3.5 million abatement as per Section 4A of the Act. Estates valued below this threshold are automatically exempt from estate duty.
The executor of the estate is typically responsible for calculating and paying estate duty, ensuring that all assets are accurately valued and reported to SARS. This process demands rigorous due diligence to avoid errors, penalties, or disputes that could delay the estate’s finalisation.
Penalties for late payments of Estate Duty
According to the Act, estate duty must be paid within one year from date of death, unless SARS grants an extension under exceptional circumstances. Where the estate duty assessment is delayed beyond that one year, interest at a rate of 6% shall be payable from a date preceding one year after death.
Should an Executor foresee that estate duty will not be paid within that one year, it is crucial that an Executor applies for an extension to SARS in accordance with section 10(2) of the Act.
Section 10(2) requires the following criteria, for an extension to be considered:
- That the delay in the estate duty payment was not occasioned by the Executor or by any person liable for the duty[6];
- That a reasonable deposit/partial payment is made towards estate duty, having due and reasonable regard to the amount of duty payable[7]; and
- That such an application for an extension is made to the Commissioner in writing.[8]
Who is liable for Estate Duty Penalties?
The Executor is liable for estate duty liabilities in their representative capacity. However, in cases where the Executor disposes any amounts of which estate duty is due and remains unpaid, or if an executor disposes funds that came into his or her possession after the estate duty liability is due and remains unpaid, the Executor can be held personally liable for such unpaid estate duty liabilities.[9]
The Critical Role of Due Diligence
Due diligence in estate administration involves systematically identifying assets, accurate valuation of assets and accurately recording all assets and liabilities to identify whether estate duty is payable. Executors are required to assess the liquidity of the estate at all times and to avoid under or over-valuation of assess. With this said, it is therefore additionally critical to apply sections 10(1) and 10(2) in practice to avoid unnecessary penalties, at the cost of the beneficiaries, or the Executor in their representative or personal capacity.
Conclusion
Estate duty, particularly under sections 10(1) and 10(2) of the Estate Duty Act demands precision and proactive management to ensure compliance and minimise tax liabilities. Failing to pay estate duty timeously can result in costly penalties, disadvantaging heirs and causing personal liability for Executors.
With rigorous due diligence, Executors can avoid these pitfalls, by ensuring a smooth estate administration process and preserving the estate value and assets for beneficiaries. Partnering with a law firm specializing in deceased estates and trusts provides the expertise needed to navigate these complexities, offering peace of mind and protecting your legacy.
- Robyn Siljeur, Trusts and Estates Department
- Act 45 of 1955.
- Section 4A of the Estate Duty Act 45 of 1955.
- South African Revenue Services on Estate Duty, available at https://www.sars.gov.za/types-of-tax/estate-duty/ (accessed on 18 June 2025).
- South African Revenue services Frequently Asked Questions: Deceased Estates available at https://www.sars.gov.za/wp-content/uploads/Ops/Guides/LAPD-IT-G31-FAQs-on-Deceased-Estates.pdf
- Theunissen A ‘South African Estate Planning and Offshore Assets – Do I need Two Wills? (2020) available at https://www.sstlaw.co.za/uncategorized/intellectual-property-disputes/ (accessed on 18 June 2025).
- Section 10(2) of the Estate Duty Act.
- Section 10(2)(a) of the Estate Duty Act.
- Section 10(2)(b) of the Estate Duty Act.
- South African Revenue Services on Estate Duty, available at https://www.sars.gov.za/types-of-tax/estate-duty/ (accessed on 18 June 2025).
While every reasonable effort is taken to ensure the accuracy and soundness of the contents of this publication, neither writers of the articles nor the publisher will bear any responsibility for the consequences of any actions based on information or recommendations contained herein. Our material is for informational purposes and should not be construed as legal advice.
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