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‘Nothing is certain except death and taxes’ – Benjamin Franklin, 1789.

Not much has changed in the more than two centuries since that statement was made. Together with the Master of the High Court, the South African Revenue Service (SARS) plays an integral role in the administration of deceased estates. The types of taxes an individual’s deceased estate is liable for differ on a case by case basis, however at some point SARS will certainly be involved. All taxpayer’s deceased estates must be reported to SARS. This includes submitting the Liquidation and Distribution Account, which sets out the assets and income to be taxed in the estate, and contains the Estate Duty Addendum used to calculate if there is any Estate Duty payable.

In 2016 the taxation system for deceased estates underwent significant changes, both in terms of the Master’s requirements and the role of SARS in the process. The Master delegated the examination and oversight of Estate Duty to SARS. This means that every individual taxpayer’s deceased estate must be reported to SARS and not only to the Master. One of the requirements of the deceased estate process is that a Deceased Estate Clearance Certificate (DEC) be issued by SARS. The DEC is issued once all the tax requirements have been complied with. This means that all the outstanding tax returns from before and after death have been submitted, all outstanding taxes have been paid and the Estate Duty Addendum has been approved.

When reporting a deceased estate to SARS, the taxpayer’s current profile must be coded as a deceased estate. SARS will issue a new number to the deceased estate that will be linked to the existing income tax reference number of the deceased. Ultimately, the profiles deal with income before death and income after death separately and returns for both profiles need to be filed. Income after death can include things such as interest earned on accounts and rental income received.

The process of obtaining the DEC is often one of the biggest factors causing delays in finalising a deceased estate and distributing assets to the heirs. Tax practitioners have reported that the frequency of deceased estates being audited by SARS has increased in recent times. There are also more instances of SARS requesting additional supporting documents like tax certificates, valuations of assets and other documents, depending on the complexity of each case.

In times with increasing rules and regulations regarding all aspects of the administration of deceased estates, it is more important than ever that Executors are assisted by competent professionals with the necessary skills and experience to navigate the process as efficiently as possible.

Contact Curran Attorneys on (021) 671 9322 for assistance in this regard.