Inheritance Tax in South Africa

The Current Situation as well as Proposed Changes

‘In this world nothing can be said to be certain, except death and taxes,’ is a well-known quote from Benjamin Franklin, one of the Founding Fathers of the United States.

Quick Overview of Inheritance Tax in South Africa

✔️What is inheritance tax in South Africa?
✔️Who is obliged to pay inheritance tax in South Africa?
✔️Proposed recommendations pertaining to inheritance tax in South Africa
Controversial proposal about inheritance tax

Death and taxes, two certainties that go together in the form of inheritance tax in South Africa.

What is Inheritance Tax in South Africa?

Inheritance tax is a tax payable by a person who inherits assets, for instance, money or property, from a person who has died.

South Africa’s inheritance laws apply to every person who is the owner of property in the country.

The three main laws with regard to inheritances in South Africa are:

• The Administration of Estates Act (Act 66 of 1965), which regulates the disposal of deceased estates in South Africa;
• The Wills Act (Act 7 of 1953), which affects all testators with property in South Africa;
• The Intestate Succession Act (Act 81 of 1987), which is applicable to all deceased individuals who have property in South Africa and who left no valid will.

Who is Obliged to pay Inheritance Tax in South Africa?

Beneficiaries

In South Africa, there is no tax payable by a beneficiary on assets received from an inheritance. SARS explains the situation as follows: ‘An asset inherited is a “capital receipt” and is therefore not included in the taxpayer’s gross income. Therefore, in South Africa, there is no tax payable by a person who receives an inheritance. Capital Gains Tax (CGT) is also not payable by the recipient of an inheritance.’

Deceased Estate

Although a beneficiary does not have to pay inheritance tax on what he or she inherits, inheritance tax applies to the estate of a deceased person, commonly known as a ‘deceased estate,’ in the form of estate duty.

SARS describes the purpose of estate duty as, ‘… to tax the transfer of wealth (assets) from the deceased estate to the beneficiaries.’

Essentially, estate duty, previously known as succession duty, is a form of capital transfer tax.

Estate duty is regulated according to the Estate Duty Act (Act 45 of 1955).

Estate Duty

Tax rate

Estate duty is a tax payable on the ‘dutiable estate’ (taxable amount) of a deceased estate and is charged at a tax rate of 20% on the first R30 million, and at 25% on the amount above R30 million.

Abatement

Currently, a primary abatement of R3.5 million is allowed and any bequest made to a spouse is not subject to estate duty. When the surviving spouse dies, the unutilized primary abatement is carried over, implying that an amount of R7 million of the deceased estate is then not taxable.

Dutiable estate

The dutiable estate comprises all the property (assets and liabilities) of a deceased person, less any deductions allowed.

Property (assets and liabilities)

Estate duty is levied on the assets of deceased individuals who resided in South Africa at the time of their death (even if they were not South African citizens), and on the South African assets of a deceased person who lived in a foreign country.

Further, estate duty also applies to foreign property owned by a deceased if he or she was a resident of South Africa at the time of death.

Assets in an estate can include, inter alia, a house, vehicles, furniture, cash, and shares in companies. Examples of liabilities are mortgage bonds, loans, and tax payable to SARS.

Allowable deductions

Allowable deductions provided for in section 4 and 4A of the Estate Duty Act, to reduce the dutiable estate are administration costs, liabilities, funeral, tombstone and death-bed expenses, property transferred to a surviving spouse, debts, assets inherited by the surviving spouse, and bequests made to qualifying public benefit organisations (PBOs).

Estate duty and retirement funds and life insurance policies

Funds held in any retirement fund, such as a retirement annuity, pension fund, provident fund, or living annuity are not considered ‘property’ by SARS and are therefore not subjected to estate duty.

With regard to a life insurance policy, where the estate of an individual is the nominated beneficiary, the proceeds of the policy will be included in the calculation of the estate duty. Concerning policies where a policy is paid directly to a beneficiary, SARS has the following regulation:  ‘The executor must recover the estate duty attributable to such policy directly from the beneficiary (in other words, this portion of the estate duty will not be paid by the deceased estate).’

Estate duty payable to SARS

When the final figure of estate duty is determined, it is normally the responsibility of the executor of the deceased estate to pay the tax over to SARS before the remaining funds are paid to the beneficiaries.

Proposed recommendations pertaining to inheritance tax in South Africa

The Davis Tax Committee (DTC) was set up in 2013 with the instruction to review South African Tax Policy and provide recommendations to improve the tax policy framework. Obviously, inheritance tax, which includes estate duty, was part of the DTC’s focus. Judge Dennis Davis was appointed chairman of the DTC.

The final report of the DTC on Estate Duty was released on August 24, 2016. The recommendations in the final report also addressed the role and relevance of estate duty and could cause a significant change in the estate planning of individuals.

However, as of July 2025, National Treasury implemented the recommendations only in part, for instance, the estate duty on estates in excess of R30 million was increased to 25%.

Although most of the recommendations are still only guidance and advice to the government, and while it is uncertain how many of these recommendations will be implemented, it will be beneficial to have a look at what these recommendations entail. There is still a possibility that they can be enacted by the National Treasury, affecting inheritance tax. Keep in mind, the government is always looking for ways to increase its tax revenue to satisfy its never-ending appetite for spending.

Some of the proposed recommendations by the Davis Tax Committee (DTC)

Estate duty rates and abatement

Abatement

Presently, the first R3.5 million of a deceased estate is exempt from estate duty. It is recommended that it is significantly increased to R15 million.

Estate duty rate

As already mentioned, the proposal that the estate duty rate be increased to 25% when the value of an estate exceeds R30 million, was already executed.

Proposed estate duty rates

If this proposal is implemented, probably 90% or more of deceased estates would no longer have an estate duty liability.

Transactions between spouses

At present, transactions between spouses enjoy the following tax relief measures:

• Donations between spouses are not subject to donations tax.

The DTC proposed that this exemption be removed and recommended an exemption from donations tax that should provide for the reasonable maintenance of the taxpayer and his/her family.

• Transfer of assets in respect of a divorce order are free from capital gains tax and donations tax.

It is suggested that assets transferred between spouses according to a divorce order should be subject to exemption similar to the death benefit for estate duty and capital gains tax. However, the utilization of this exemption should reduce the taxpayer’s available death benefit reductions or any subsequent divorce orders.

• Bequests to a spouse on death are free from capital gains tax and estate duty.

The DTC advised that the current capital gains tax rollover provisions applied to inter-spousal bequests should be rescinded and replaced with an increased exemption available on death of R1 million (currently R300 000).

Currently, section 4q of the Estate Duty Act (Act 45 of 1955) stipulates that the value of all property which accrues to the surviving spouse, either in respect of a will or by intestate succession, is deductible from the gross estate of the deceased. The DTC’s proposal is that this deduction should be cancelled and be replaced with a substantial primary abatement. The DTC is convinced that this action will ensure consistent and impartial treatment for all taxpayers regardless of marital status.

Donations tax

Another proposal of the final report of the DTC is that donations made in anticipation of death should no longer be exempt from donations tax.

Trusts

The perception of the DTC is that taxpayers are utilizing trusts mainly to reduce income tax or to avoid estate duty.

To rectify this situation the DTC recommended the following measures:

• Where an interest-free or low-interest loan exists between a trust and a connected person, the connected person will be considered to control the trust, consequently, the assets of the trust may be brought into the estate of the taxpayer for estate duty purposes.
• All discretionary income, i. e. nonvested income, be it capital or revenue, should be taxed at a flat rate of 41% in the trust and not in the hands of the beneficiary or other connected person.

Wealth taxes

With regard to future investigations, the DTC has advised that it will conduct a further investigation into the possible implementation of wealth taxes in South Africa. At present, there is still no finality about wealth taxes in South Africa.

Controversial Proposal about Inheritance tax

Constitutional law expert Pierre de Vos put the cat among the pigeons on June 10, 2025 in an article, ‘Privilege and inheritance: Time to disrupt intergeneration transfers of wealth,’ on his blog, Constitutionally Speaking.

The following is an abstract of the article:

‘The transfer of wealth between generations increases inequality and makes it more persistent across generations. In South Africa, the problem has an acute racial dimension, as the transfer of intergenerational wealth is a significant mechanism through which subsequent generations of white South Africans are able to retain and further boost our economic privileges accumulated over generations of colonial and apartheid rule. The time has, therefore, come to start the process of reimagining how we deal with the transfer of intergenerational wealth.’

The crux of De Vos’s argument is that the cause of the intergenerational transmission of inequality is inheritance and that intergenerational inheritance perpetuates race-based inequality in South Africa.

In a follow-up article on his blog, he mentioned that at the heart of his call for a rethink of inheritance law is a belief that social solidarity should weigh just as heavily for the society as ‘narrow familial solidarity and naked interest.’

De Vos suggested that there are “two broad” approaches to reduce the effects of the continuation of inequality.

‘First, the right to inherit (or to inherit more than intimate personal belongings or more than a certain amount) could be abolished entirely’, De Vos wrote. However, he said there can be exceptions regarding spouses or partners and non-adult children.

As a second ‘more modest intervention’ he proposed ‘the imposition of an inheritance tax, calculated on a sliding scale with the top scale at 100%, along with a similar tax on intergenerational donations made before death.’ To illustrate his point, he used the following example: a 10% inheritance tax on any amount that exceeds R100 000 in an estate, with a gradual increase up to R1 million in an estate. Any amount more than R1 million could be taxed at 100%. De Vos emphasized that the figures were only an illustration.

As one can expect, the general response to his proposals was outrageous, especially on Twitter. In his follow-up article, De Vos mentioned that his call to reimagine how we deal with the transfer of intergenerational wealth was, ‘let’s say, not well received.’ However, he was at the same time encouraged by ‘thoughtful and nuanced responses.’

Although, he already assumed in his first article on the subject that many people will not be keen on his proposal due to the following reason: ‘The idea of inheritance as something natural and inevitable is deeply embedded in our various cultures.’

De Vos listed four objections to his inheritance tax proposal, namely:

• ‘Drastically limiting the amount that a parent can bequeath to a child is a novel or radical idea.’
• ‘Heavily taxing inheritance will reduce people’s motivation to work and save.’
• ‘It is not practical to impose a steep inheritance tax and it will be avoided.’
• ‘Imposing severe restrictions on inheritance will destroy tax morale and will lead to tax avoidance and evasion.’

Other views that opposed De Vos’s suggestions were, among others:

• In many cases, wealth is the result of hard work and choices to save rather than spend.
• There is nothing wrong with families accumulating wealth to eventually bequeath to the next generation.
• From an economic viewpoint, it was pointed out that if one could not let your family inherit your wealth, many would choose to spend the wealth instead. The result would be reductions in savings, hampering an economy that can generate wealth for all.

From the objections, some more emotional than others, opposing De Vos’s controversial proposal about inheritance tax, it is evident that for the majority of South African taxpayers, inheritance tax is an important issue. Any tax proposal that could jeopardies their inheritance, will be treated with suspicion and will be vehemently opposed.