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income tax
Estate duty and inheritance tax may arise on foreign assets in the event of the South African resident investor’s death. The overall benefits of owning offshore investments are generally well understood, while the effects of poor planning on the individual’s income tax are clouded. With the correct planning, these risks can be mitigated or (in some cases) avoided altogether.
Here is how to avoid some hazards should an investor pass away:
  1. Maintain a clearly written will

To avoid possible disputes after their passing, the investor should ensure that their will is written clearly and uses specific terms. Although a single will may suffice where smaller offshore investments are concerned, this may become complicated where spouses make use of a joint account. In this specific scenario, the will should state that the spouse inherits the offshore investment account.

  1. Jurisdiction tax obligations

‘Death taxes’ are not only applicable in South Africa. For South Africans holding offshore investments in another country that may abide by these taxes, the estate duty will be applicable on worldwide assets. Although there are some double taxation agreements in place, this may not completely mitigate the issue where Estate Duty is concerned.

  1. European assets

All assets located within the European Union are subject to the European Succession Regulation. This regulation determines which law applies to the succession as a whole and gives precedence to the laws of the country that holds the individual’s citizenship.

  1. Grant of representation

A grant of representation from a court or local advocate may be required for executors acting on behalf of deceased South African residents with offshore assets. This process can be lengthy, expensive and can delay the winding up of the estate. The bank typically requires this Grant of Representation to verify that the correct individual has authorisation over the deceased individual’s estate.  

  1. The complication of tax reports

Tax reporting can become a complicated process, as income tax, situs and estate duty implications are involved. Depending on the investor’s circumstances, this can have various influencing factors. To ensure the accuracy of tax reports, we advise seeking the assistance of a specialist, such as those from MMS Group.

As offshore investing has become the best way for South Africans to protect and grow their wealth whilst diversifying their profile, it is crucial to make informed decisions. To avoid unnecessary taxes, it is best to seek assistance from industry experts. The professionals at MMS Group have years of combined experience to offer our clients the best income tax consultancy. For more information, please reach out to our team.

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