YOUR LETTERS INHERITANCE FROM THE NETHERLANDS

I am about to inherit from my deceased mother who lived in the Netherlands. I have a twin sister who will inherit half. The inheritance tax has been paid in the Netherlands. In rands, the amount is approximately R2 million. The funds will be paid by the Netherlands bank into a foreign currency account, which I have opened in order to keep the funds in Euros. The Netherlands bank will only pay into one account, so once the funds arrive in South Africa I need to split them in half and pay my sister her half.

My question is: what are the tax implications for me and is there anything I need to know? I am assuming that because the inheritance tax has been paid in the Netherlands we will not be taxed again in this country? Name withheld

Kobus Kleyn, a Certified Financial Planner at financial services group Kainos, an affiliate of Liberty, responds:

The question is very light on detail. Was the deceased a citizen of the Netherlands, or did she still hold South African citizenship and was a permanent resident of the Netherlands. Are both sisters South African residents? It appears the one sibling is in South Africa, and I assume the sister may be in SA as well.

My answer would include that it is always advisable to consult with a tax practitioner, as there may be more detail required which would influence the ultimate responses, but in broad brushstrokes:

It is not clear that the money will be brought back to South Africa because the reader states that the inheritance will be deposited in a foreign currency account to keep the funds in Euros. If it is not repatriated, each sibling must declare that they hold the offshore investment and must account for any interest earned thereon when they complete their tax returns in South Africa. They are not compelled to repatriate the funds, but they are obliged to disclose that they have them.

If the late mother was a South African resident, then in the process of winding up the estate, the executor would have had to establish if there was a double taxation agreement in place, and if so, in which country the asset/s would be taxed. The reader should thus have a reference back to the South African executor and tax practitioner in this regard.

If the deceased was not a South African resident, then any death duties should have been paid in the Netherlands before distribution to the heirs.

If it is necessary, once the money is in South Africa in the one heir’s account, to transfer half to the other sibling’s account, this transfer will appear, on the face of it, to be a donation. It could trigger donations tax at 20% after the first R 100 000 in a tax year. The tax practitioner would have to prove with a paper trail that it is, indeed, an inheritance through a simple transfer of capital, due to the use of a single account by one heir, and not, in fact, a donation. It would thus be better to pay the inheritance into each sister’s separate account and not into only one.

Indirect Exposure To Equities

I'm a young professional who's just started my career. I really like the idea of trading shares and building an equity portfolio, but seeing how expensive shares are, what options do I have for equity exposure if I can't buy them directly?

Name withheld

Graham Lovely, wealth manager at PSG Wealth, responds:

Unit trusts are the most accessible form of investment where you can gain up to 100% equity exposure within a fund. Depending on the institution, you may invest as little as R500 per month or a lump sum of R10 000 to get started. There are several ways you can approach this and the best would be to speak to a qualified financial adviser because he or she would be able to guide you in terms of which funds to buy in accordance with your risk profile and goals.

Alternatively, you could open an account online with a fund manager and specify the fund allocations yourself. Many financial institutions also offer multi-managed funds where they employ managers whose sole job it is to select and monitor funds which they then package into solutions to suit different needs.

There are many advantages to these solutions including diversification between asset classes (like equities, property, bonds and cash), across various geographies and even themes and styles of investing. You could also apply for an offshore fund which involves externalising cash or you could buy local feeder funds that feed into offshore funds. The help of an adviser would be valuable, as the investment universe is vast and can be a bit daunting.