Cross-Border Inheritances and Historical Emigration: Navigating Exchange Control and Tax Compliance

Cross-Border Inheritances and Historical Emigration: Navigating Exchange Control and Tax Compliance

• 02 June 2025
• Administration of Estates
• The Tax Faculty Tax Specialist

This article is based on tax law for the year ending 29 February 2026.

Question: 

The clients emigrated from South Africa in the late 1980s and early 2000s. Their mother passed away in South Africa in 2022, leaving an inheritance now available for distribution. Nedbank requires the completion of an outward/cross-border/international payment request. The key issues are whether the clients were required to inform Exchange Control upon leaving South Africa prior to 2001, and the implications of any potential non-compliance with those requirements.

Answer:

The Problem / Facts

The clients emigrated from South Africa in the late 1980s and early 2000s. Their mother passed away in South Africa in 2022, leaving an inheritance now available for distribution. Nedbank requires the completion of an outward/cross-border/international payment request. The key issues are whether the clients were required to inform Exchange Control upon leaving South Africa prior to 2001, and the implications of any potential non-compliance with those requirements.

Analysis of the Tax Issues Identified

The primary tax issues include:

• Determination of the clients’ tax residency status at the time of emigration and at present
• Exchange control compliance obligations for emigrants prior to 2001
• Tax implications of receiving an inheritance as non-residents
• Current procedures governing cross-border inheritance transfers
• Consequences of historic non-compliance with exchange control regulations

Applicable Legislation

Income Tax Act 58 of 1962:

• Section 1: Defines “resident” for tax purposes
• Section 5(10): Excludes inheritances from gross income
• Section 9H: Provides for deemed disposal on ceasing to be a resident

Currency and Exchanges Act 9 of 1933:

• Governs exchange control regulations, including cross-border fund transfers

SARB Exchange Control Regulations:

Application of the Law to the Facts

Historical Exchange Control Requirements (Pre-2001):
Before 2001, South Africa had stringent exchange control measures in place under the Currency and Exchanges Act. Emigrants were typically required to apply for formal emigration status through the South African Reserve Bank (SARB). This process involved submitting prescribed documentation and obtaining authorisation for the offshore transfer of assets.

Current Tax Residency Status:
In terms of Section 1 of the Income Tax Act, individuals who left South Africa in the late 1980s and early 2000s are likely no longer regarded as South African tax residents. This is due to the fact that they would have ceased to be ordinarily resident and would not satisfy the physical presence test.

Inheritance Tax Treatment:
According to Section 5(10) of the Income Tax Act, inheritances received by beneficiaries are not included in gross income. This exemption applies regardless of whether the beneficiary is a resident or non-resident of South Africa.

Current Exchange Control Position:
SARB has significantly liberalised exchange control regulations. Currently, private individuals who are no longer resident in South Africa and are not registered on the SARS system may receive inheritance payments of up to R10 million without requiring a Manual Letter of Compliance from SARS. Where the inheritance amount exceeds R10 million, SARS certification confirming tax compliance is required.

Practical Resolution:

The clients are advised to:

• Verify whether the inheritance amount falls below or exceeds the R10 million threshold
• Confirm their current tax compliance status with SARS, especially if amounts exceed R10 million
• Complete Nedbank’s prescribed cross-border/international payment documentation
• Note that historic non-compliance with exchange control procedures is unlikely to present major issues under current regulations, especially in the case of bona fide inheritances

The Reserve Bank’s more flexible approach suggests that legitimate inheritances from deceased South African estates can be transferred to non-resident beneficiaries via authorised banking channels, even if historical emigration procedures were not properly concluded.

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