A guide to inheritances for South African beneficiaries living overseas

Scenario 1: Bona fide non-resident

The beneficiary is a bona fide non-resident i.e. they were born overseas and have never been a South African Resident.

Solution: Payment to this beneficiary can be made by providing a copy of the beneficiary’s country of origin ID or passport and proof of overseas address.

Scenario 2: Financial emigration

The beneficiary formally emigrated from South Africa i.e. financially emigrated pre-March 2021. In this scenario, the beneficiary was once a South African resident. However, they have since emigrated and placed their emigration on record with the South African Reserve Bank (SARB) when this was still an option up until March 2021.

Solution: The inheritance can be paid to the beneficiary overseas. The beneficiary simply has to provide confirmation of their emigration – normally a letter from the SARB with an ECA reference number. Alternatively, we can enquire with SARB for confirmation of the client’s emigration and, on receipt of confirmation, proceed with a transfer of funds to the beneficiary overseas.

See also: Ask Tim: Do I need to financially emigrate to inherit from South Africa?

Scenario 3: South African Resident Temporarily Abroad

This is often the scenario that causes the most confusion as the beneficiary may have left South Africa 20 years ago, but has never placed their emigration on record with SARB and may or may not have tax emigrated.

Solution 1: Provided the beneficiary still has a green barcoded SA ID book or ID card, the beneficiary can make use of their R1 million single discretionary allowance and, if they still have an active South African Reserve Bank (SARS) income tax number (and their SARS profile is compliant and up to date), they can apply for tax clearance for foreign investment and utilise the R10 million foreign investment allowance (FIA) to send the proceeds of their inheritance offshore. The beneficiary can only make use of the R1 million single discretionary allowance where they have not tax emigrated.

Solution 2: Where the client has either tax emigrated or left a long time ago and is no longer tax resident and no longer on the SARS database, then SARB Circular 8 can be applied.

SARB Circular 8 was a ruling issued by SARB in May 2021, after the removal of the financial emigration, to specifically address scenarios where beneficiaries of SA deceased estates living overseas inherit or are death beneficiaries of South African policies up to R10 million and they have no other remaining assets in SA and no SARS tax profile in SA.

This solution will apply to more and more South Africans living overseas and there are some factors to consider:

• The longer ago one left SA, the more likely it is the beneficiary will no longer be on the SARS system. This can be subjective, for e.g. if the beneficiary left SA 20 years ago, one could safely assume they will no longer be on the SARS database, where if they left five years ago there is a good possibility they are.
• All South Africans leaving SA post-March 2021 (i.e. financial emigration is not an option for them) should consider tax emigration.
• Tax emigration is the process of changing your tax status to non-resident with SARS. Tax emigration is not a choice but a function of the taxpayer meeting certain conditions (the ordinarily resident and physical presence tests).
  
• If they can demonstrate tax emigration, i.e. the letter from SARS confirming change of status, then they can apply Circular 8.

See also: Ask Tim: Inheriting from South Africa without an SA tax number

We’ve been helping individuals and businesses make international transfers out of South Africa for over 20 years. For help receiving a South African deceased estate, you can get in touch at estates@sableinternational.com or give one of our advisers a call on +27 (0) 21 657 2133.