There are 4 general taxes applicable to estate planning. These are
- Income tax (tax payable by the deceased, the estate or beneficiaries)
Individual income tax (otherwise known as Personal income tax) rates in South Africa range from 18% (for income below R188,000 p.a) to 41% (for amounts over R701,300), although the tax threshold of R75,000 (for persons below age 65) means that anyone earning less than this amount pays no income tax.
- Capital Gains Tax (CGT)
A resident, as defined in the Income Tax Act 58 of 1962, is liable for CGT on assets located both in and outside South Africa. A non-resident is liable to CGT only on immovable property in South Africa or assets of a “permanent establishment” (branch) in South Africa.
- Estate Duty, and (possibly)
If the total net value of the estate is R4 million, Estate Duty will be dutiable on 20% of the amount exceeding R3.5 million which amounts to R100,000 (20% of R500,000). It is normally the responsibility of the executor to pay the duty as levied on the property of the deceased
- Donations tax
For example, if a once-off donation of R80,000 is made by an individual, no tax is payable, but if a donation of R140,000 is made, then Donations Tax of R8,000 is payable (20% of the amount exceeding R100,000, which is R40,000). For companies or trusts, the exemption for casual gifts is up to R10,000 per tax year.