Nobody wants to think about it, but if you are a South African living abroad, your death will trigger a set of tax consequences that your family needs to understand. SARS does not stop caring about you just because you moved overseas. Depending on whether you were still a South African tax resident at the time of death, your estate could face both capital gains tax and estate duty in South Africa, on top of whatever inheritance or estate taxes apply in the country where you lived.
This guide explains how South African expat tax on death works, including the deemed disposal under Section 9HA, the estate duty calculation, and how your residency status at the time of death determines what SARS can and cannot tax.
Section 9HA: The Deemed Disposal on Death
When a person dies, Section 9HA of the Income Tax Act treats them as having disposed of all their assets at market value on the date of death. This is similar to the deemed disposal that applies when you cease tax residency, except the trigger is death rather than emigration.
The result is a capital gains tax event. The difference between the market value of each asset on the date of death and its original base cost is a capital gain (or loss). The 40% inclusion rate applies for individuals, and the resulting taxable capital gain is included in the deceased’s final income tax return.
There are important exceptions. Assets disposed of to a surviving spouse (whether under a will, intestate succession, or the accrual system) are not subject to the deemed disposal. Instead, the surviving spouse “steps into the shoes” of the deceased, inheriting the original base cost and acquisition date. This is a valuable rollover that defers the CGT until the surviving spouse eventually disposes of the asset.
Other exclusions include retirement fund benefits (pension, provident, RA) and long-term insurance policies where the proceeds are already disregarded for CGT purposes.
The R300,000 CGT Exclusion on Death
In the year of assessment in which a person dies, the annual CGT exclusion increases from the standard R40,000 to R300,000. This higher exclusion applies to the sum of all capital gains and losses triggered by the deemed disposal on death. It provides a meaningful buffer, especially for estates with moderate investment portfolios.
The R300,000 exclusion replaces the normal R40,000 exclusion for that year. It is not in addition to it. If the deceased had already used part of the R40,000 exclusion on disposals earlier in the year before death, the remaining portion of the R300,000 applies to the deemed disposal on death.
South African Expat Tax on Death: How Residency Status Matters
Your residency status at the time of death determines the scope of what SARS can tax.
If you were a SA tax resident at the time of death, SARS applies the deemed disposal to your worldwide assets. Every qualifying asset you own, whether in South Africa or abroad, is subject to CGT on the gain accumulated since acquisition (or since 1 October 2001, when CGT was introduced). Your estate is also subject to SA estate duty on worldwide property.
If you had ceased your SA tax residency before death, SARS can only apply the deemed disposal to assets that remain in the SA tax net, primarily South African immovable property and assets connected to a permanent establishment in SA. Your foreign assets fall outside SARS’s reach. Estate duty also has a narrower scope for non-residents: only property situated in South Africa is included in the estate for duty purposes.
The deceased estate’s tax residency follows the residency of the deceased at the date of death. If the deceased was a resident, the estate is treated as a resident. If the deceased was a non-resident, the estate is treated as a non-resident.
Estate Duty
Estate duty is a separate tax from income tax and CGT. It is levied under the Estate Duty Act on the dutiable amount of a deceased person’s estate. The rates for deaths on or after 1 March 2018 are 20% on the first R30 million of the dutiable amount and 25% on any amount above R30 million.
Every estate receives a R3.5 million general deduction. If the deceased was a surviving spouse of a previously deceased person whose estate did not fully use their R3.5 million deduction, the surviving spouse’s estate may receive a combined deduction of up to R7 million (R3.5 million x 2).
The value of property that accrues to a surviving spouse is deductible from the estate, which often significantly reduces the dutiable amount. Debts owed by the deceased (including the final income tax assessment) are also deductible.
Worked Example: Expat Death as a SA Tax Resident
Martin, a SA tax resident living in London, passes away. His worldwide estate includes a share portfolio (market value R4,000,000, base cost R2,000,000), a London flat (market value R6,000,000, base cost R3,500,000), SA property left to his wife (R2,500,000), and retirement funds (R1,800,000, excluded).
CGT calculation: Shares gain R2,000,000 + London flat gain R2,500,000 = R4,500,000 total gains. SA property to spouse is rolled over (no CGT). Less R300,000 death exclusion = R4,200,000 net gain. Taxable capital gain at 40% inclusion = R1,680,000. Tax at marginal rate (say 36%) = approximately R604,800.
Estate duty: Total estate value R14,300,000. Less property to spouse R2,500,000. Less debts and deductions. Less R3.5M general deduction. Dutiable amount approximately R8,300,000. Estate duty at 20% = approximately R1,660,000.
Cross-Border Estate Planning
If you are a South African expat, your estate may be subject to taxes in both South Africa and the country where you lived. Some countries have inheritance taxes, others have estate taxes, and some have neither. South Africa’s DTA network includes provisions for estate and inheritance tax relief in some treaties, but not all.
Basic cross-border estate planning steps include having a will in each country where you hold assets (a SA will for SA assets and a foreign will for foreign assets), understanding which country’s law applies to which assets, considering whether ceasing SA tax residency reduces the estate’s exposure to SARS, and ensuring your executor understands the obligations in both jurisdictions. You can find SARS’s guidance on deceased estates on the SARS website.
Executor Obligations for Non-Resident Estates
The executor of a deceased estate must file a final income tax return for the deceased (covering the period from 1 March to the date of death) and a separate return for the deceased estate. If the deceased was a SA tax resident, the executor must declare worldwide income and deal with the deemed disposal. If the deceased was a non-resident, the executor only deals with SA-source income and SA-situated assets.
The executor must also obtain a tax clearance from SARS before the estate can be wound up and assets distributed to heirs.
For the full picture on your obligations as a South African living abroad, start with the complete guide to South African expat tax. For understanding the exit tax that applies when you cease residency while alive, see our exit tax guide.
This guide is for information only and does not constitute tax advice.
Tax and exchange control laws change frequently. Always consult a qualified tax professional before making decisions about your South African tax obligations.