Estate Duty & Donations Tax in South Africa: What You Need to Know in 2025
In estate planning and wealth management, two tax types often overlooked until it’s too late are estate duty and donations tax. Both serve as vital mechanisms through which SARS collects tax on the transfer of wealth—either during your lifetime or upon your death.
For individuals and business owners looking to protect intergenerational wealth, understanding how these taxes work is not just about compliance—it’s about planning wisely to minimise unnecessary costs.
Understanding Estate Duty
Estate duty is a tax levied on the transfer of wealth upon a person’s death. Whether you’re a high-net-worth individual or a modest estate holder, this tax applies if your estate includes “property” and “deemed property”, and your worldwide assets fall under South African tax jurisdiction.
Who Pays Estate Duty?
Estate duty is payable on the value of the estate belonging to:
- South African tax residents – on worldwide property, minus allowable deductions.
- Non-residents – only on South African-situated property, again less any permitted deductions.
This includes all property owned at death, deemed property (such as life policies), and certain trust interests.
How is Estate Duty Calculated?
The duty is levied on the dutiable value of the estate, calculated as: Gross value of estate – allowable deductions = Dutiable estate value
Key Deductions:
- A R3.5 million abatement (automatically deducted).
- Debts and liabilities of the estate.
- Bequests to Public Benefit Organisations (PBOs).
- Assets inherited by a surviving spouse, which are not subject to duty due to the “roll-over” relief principle.
Estate Duty Rates (2025):
- 20% on the first R30 million of the dutiable estate.
- 25% on any amount exceeding R30 million.
This makes estate planning vital for high-net-worth individuals, especially those with complex asset structures.
Understanding Donations Tax
Donations tax complements estate duty by taxing the voluntary transfer of wealth during a person’s lifetime. Its objective is to close the loophole where individuals may try to circumvent estate duty by gifting their assets prior to death.
Who Must Pay?
The donor (the person making the donation) is liable for the tax, and SARS requires that the tax be paid by the end of the month following the month in which the donation took place.
Donations Tax Rates (2025):
- 20% on the value of all donations made during the tax year up to R30 million.
- 25% on the portion of cumulative donations exceeding R30 million.
Exemptions You Should Know:
- Natural Persons:
- The first R100,000 donated each year is tax-free.
- Common for use in family gifting or minor estate planning transfers.
- Legal Entities:
- Exempt donations are limited to casual gifts not exceeding R10,000 per year.
- Fully Exempt Donations:
- Transfers between spouses (irrespective of value).
- Donations to approved Public Benefit Organisations (PBOs).
- Donations between South African group companies, if certain conditions are met.
Common Pitfalls and Planning Tips
Mistakes to Avoid:
- Forgetting to declare donations or misreporting can trigger penalties and SARS audits.
- Overlooking deemed property in estate duty calculations, such as policies not paid to the estate but still deemed property for tax.
- Assuming informal gifts are tax-free — SARS sees value, not form.
Proactive Strategies:
- Use the R100,000 exemption annually to gradually reduce your estate’s value.
- Incorporate PBO donations into legacy planning to both reduce estate duty and support meaningful causes.
- For large estates, consider the use of inter vivos trusts to separate personal wealth from long-term growth assets (though trust taxation brings its own considerations).
Why It Matters to Financial & Managing Directors
As a fiduciary, business owner, or financial director, estate duty and donations tax aren’t only personal issues — they affect shareholder continuity, succession planning, and even share transfer taxation. A poorly planned estate can result in a forced asset sale or liquidity crunch, leaving dependants and co-directors in a difficult position.
Marwick & Company: Your Estate and Tax Strategy Partner
Our dedicated team offers strategic advisory services across:
- Estate planning and will drafting
- Trust structuring and deceased estate administration
- Tax-efficient succession plans for business owners
- Comprehensive donations and estate tax compliance
We guide clients in navigating the complex web of intergenerational wealth transfer with confidence, precision, and compassion.
Let’s talk about your estate plan today.
Final Thoughts
Estate duty and donations tax are more than statutory obligations—they’re opportunities for smart, strategic planning. By making informed choices now, you secure not just your legacy, but peace of mind for those who follow.