After death comes taxes – Situs Tax

“Location, location, location” is a key consideration in the real estate and tax industries.

When I googled "situs," Google appropriately indicated that it referred to "position or situation."

When I googled "tax," I was flooded with meanings that generally referred to suffering. I even got two weak matches: "pork barrel" and "deadweight." This is just a disclaimer to Mr. Commissioner. This was Google's opinion.

Dear Executors, when dealing with Situs Tax, do not use Google; instead, phone your trusted tax practitioner with experience in this field before you end up in the wrong position. 

Situs Tax

Suppose the estate you are administering has assets located offshore. In that case, you will need to consider taxing that asset in the jurisdiction in which it is situated (situs tax).

For instance, if the estate has immovable property in the UK, the property's situs (size, position, place) is the UK. The UK levies a 40% inheritance tax on assets valued over £325,000.00. If the property is valued at £1,000,000.00, the situs tax (referring to the inheritance tax levied in the UK) on the immovable property would be £270,000.00.

If the deceased was an ordinary resident of South Africa for tax purposes, this offshore property would form part of the property for purposes of the Estate Duty Act (Section 3). If so, and the exchange rate is R24 per £1, the property will be included in the estate at R24 000 000.00, on which, ignoring the 4A deduction, the estate duty (@ 20%) would be R4 800 000.00 (equal to £200 000.00).

Available relief is found within the Estate Duty Agreement between South Africa and the UK. In this case, South Africa will allow a credit (not exceeding the Estate Duty payable in South Africa) of the amount proven to have been paid in the UK on the property. This would mean, in this instance, that no Estate Duty would be payable in South Africa as the inheritance tax paid in the UK (£270 000.00) exceeds the Estate Duty payable in South Africa (R4 800 000.00 or £200 000.00).

This article was only to provide a simple explanation of the situs tax. It is not a guide on how to calculate situs tax, double tax credits, or the applicable estate duty on situs assets.

So now, at your next family dinner, when that irritating family member projects lingo all over the leg of lamb and mash, you put him back into his SITUS!