Inheriting assets from a loved one can be both a blessing and a challenge, especially when the beneficiaries are living abroad. If you find yourself in a situation where you need to transfer an inheritance from South Africa to beneficiaries overseas, it is essential to navigate the complex legal and financial aspects involved.
Executors and conveyancers are often faced with the daunting challenge of how to make payment of deceased estate legacies to beneficiaries offshore. One would think in today’s day and age it would merely be making a payment with the push of a button but that is unfortunately not the case seeing that South Africa has Exchange Control Regulations which must be adhered to.
To successfully transfer inheritance from South Africa to beneficiaries abroad, consider the following steps:
- Consult with an Exchange Control expert together with your legal and financial professionals who are experienced in cross-border inheritances. They can help you understand the specific regulations and requirements for your situation and ensure that you comply with South African exchange control regulations when transferring funds abroad. This may involve obtaining necessary approvals and reporting the transaction to the relevant authorities.
- Collect all relevant documents, including the will, death certificate, and any legal agreements related to the inheritance.
- Coordinate with the Executor if you are not the executor of the estate, and collaborate closely with them to facilitate the smooth transfer of assets to overseas beneficiaries.
- Open a special Forex bank account (remotely) allowing the receiver to benefit from better exchange rates.
- Tax Considerations – be aware of any tax implications both in South Africa and the country where the beneficiary lives. Consulting with tax professionals is advisable to minimise tax liabilities.
- Plan for Currency Exchange. Given currency exchange rate fluctuations, it is essential to plan the timing of the transfer to maximise the value of the inheritance.
- Maintain detailed records of all transactions and communications related to the inheritance transfer.
In the case of SA tax residents temporarily abroad one needs to make an application to SARS for an AIT for amounts up to R10m so that the funds can be transferred out of SA. The documents to be submitted to SARS will typically include a copy of the Final Liquidation & Distribution Account stamped and signed by the Master of the High Court and a bank statement issued no longer than 14 days before the date that the AIT application is submitted, reflecting the inheritance received.
In the case of private individuals who ceased to be tax residents, the following applies to Capital Transfers as per Exchange Control:
“Applications by private individuals who cease to be residents for tax purposes and who are no longer active on the SARS registered database and receive an inheritance or life insurance policy (excluding lump sum benefits from pension preservation, provident preservation, retirement annuity funds and annuities from insurers) up to R10 million, will not be required to apply to SARS for a Manual Letter of Compliance – Transfer of funds. For applications above R10 million, applicants are required to obtain a Manual Letter of Compliance – Transfer of funds, from SARS.” – Currency and Exchanges Manual for Authorised Dealers (2023/05/23), B2. J (xiii).
To transfer inheritance from South Africa to beneficiaries abroad, you will encounter three common scenarios:
1. Beneficiary Relocates Overseas After Inheriting:
If the beneficiary was originally in South Africa but has since relocated overseas after inheriting, such a person, being a tax and exchange control resident, temporarily abroad not having ceased tax residency will need to open a special Forex bank account to benefit from a better exchange rate and apply to SARS for an AIT.
2. Beneficiary Already Living Overseas:
If the beneficiary is already living abroad, the process may involve expatriating funds from a South African bank account to an overseas account. This can be subject to exchange control regulations and may require certain documentation and approvals. The beneficiary left SA years ago, never underwent formal/financial emigration (when it was still available) or did cessation of tax residency (tax emigration, and no longer has an SA passport or ID. Such a person is seen (for tax and exchange control purposes) as a SA resident, temporarily abroad.
For a beneficiary who underwent formal/financial and/or tax emigration, the process of transferring the funds differs – please see the Exchange Control Manual excerpt above.
3. Foreign Beneficiary with South African Assets:
In some cases, a foreign beneficiary may inherit assets located in South Africa, such as property or investments. One is not required to sell and transfer this out of SA but transferring these assets overseas can involve complex legal, tax and financial considerations.
Transferring inheritance from South Africa to beneficiaries abroad is a process that requires careful planning, adherence to regulations, and coordination with legal and financial professionals. By understanding the South African inheritance process and exchange control regulations, beneficiaries can navigate this complex journey and ensure that they receive their rightful inheritance from their loved ones. Currency Assist™ has been offering a secure, quick and easy money transfer process, exchange control guidance and excellent exchange rates for over a decade.