Sars External Guide On The Estate Duty Implications On Buy-And-Sell Agreements

2 1 PURPOSE There is currently no case law on the application of Section 3(3) (a) (a) (ii) of the Estate Duty Act, this guide expresses the views of SARS and removes any previously issued letter by a SARS agency that departs from the views expressed in this document. This guide explains what the concept of Key Man policy means. 2 SCOPE This basic guide explains the applicable legal requirements for deduction and payment of inheritance tax in Key Man policies. 3 REFERENCES 3.1 LEGISLATION TYPE OF REFERENCE REFERENCE Legislation and Rules Estate Duty Act, 45 of 1955 administered by SARS: Tax Administration Act, 28 of 2011 (effective 1 October 2012) Other Legislation: Trust Property Control Act, 57 of 1988 International Instruments: None. 4 DEFINITIONS AND AKRONYS SARS PBO L-D Account South African Revenue Service Public Benefit Organisation Liquidation and Distribution Account 5 BACKGROUND Currently, there is no case law regarding the application of Section 3(3) (a) (a) (ii) of the Estate Duty Act, this document expresses SARS views in this regard; And all letters previously issued by a SARS office that deviate from the views expressed in this document are withdrawn. For the purposes of section 3, paragraph 3, point a), of the act, any amount owed and recoverable is considered to be the property of the deceased under an insurance policy that is national insurance (as defined in section 1 of the act) after the life of the deceased. The condition of listing in the deceased`s estate as a heritage object for inheritance tax purposes is not based on whether or not the deceased owned the policy, but whether his life was insured. Whether the proceeds of a policy are payable to the deceased`s estate or to a designated beneficiary or have been transferred during his lifetime to a beneficiary, these revenues from a domestic policy relating to the life of the deceased fall within the scope of section 3, paragraph 3, point a) of the act. However, it may be mentioned that in cases where a utility organization or the surviving spouse is the beneficiary of the policy, policy revenues are considered a deduction within the meaning of Section 4 (h) or Section 4 (q) of the Act. Apart from the deductions mentioned above, the only other exclusions available within the meaning of the law are listed in section 3(3) (i) (i), (i) and (ii) of the act. If any of these exclusions or deductions do not apply, domestic policy revenues are subject to estate tax after the deceased`s life. The relevant part of Section 3, paragraph 3, of the Inheritance Tax Act is as follows: (3) Property, which is considered the property of the deceased, (a) includes: (a) an amount due and refundable under a policy that constitutes a domestic policy based on the duration of the love of the inheritance is greater than the total amount of premiums or counterparties , which have been proven to the Commissioner`s satisfaction, that they were paid by a person entitled to the amount owed under the policy.

With interest at six per revision: 1 page 2 out of 5 The total amount owed under these insurance policies after the life of the deceased and refundable is therefore not a property which, at the time of the death of the deceased, is considered the property of the deceased. Since it is not included in the “total value of all real estate” in the estate, it is not included in the net value of the deceased`s estate or in the amount of the estate subject to the right.

Posted in Uncategorized.