Am I liable for situs tax on my USD account if I die?
Your deceased estate may be liable for situs tax, which is tax imposed by the US on the deceased estate of a non-US resident / citizen.
What is situs tax?
Firstly, it is a rather complicated tax and therefore the services of a tax expert should be sought when considering the implications of situs tax. Simply put, situs refers to the place where an asset is located for legal/tax purposes.
Example
Let’s say you’ve purchased Tesla shares in your EasyEquities USD account. Tesla would qualify as a US asset in the event of your death because it was incorporated in the U.S.A.
US estate tax (known as Federal Estate Tax) is imposed on non-resident US situated assets which are above the minimum threshold (this is currently set at USD60 000). In other words, US estate tax is only levied on the value of US located assets above the minimum value of USD60 000.
This means that if you are a non-resident of the US, the US estate tax will be payable on an investment value greater than USD60 000. The US estate tax rate is imposed on a sliding scale from 18% to 40%.
Is my deceased estate still liable for this tax even though my shares are held in name of FWT Nominees?
Your deceased estate may still be liable to pay this US estate tax on the shares held in your EasyEquities USD account (after taking the minimum threshold into account) irrespective of the fact that your shares are held in the name of FWT Nominees.
Potential double tax treaty relief
South Africa also has its own estate duty payable on deceased estates so to prevent double taxation South Africa has entered into a Double Tax Treaty with the US pertaining to Taxes on the Estates of Deceased Persons. If your deceased estate is subject to estate duty in South Africa, you may be able to reduce your South African estate duty by claiming tax credits for the US estate tax paid when submitting the estate duty return in South Africa.
For more info please click here to see the Estate Duty Agreements on SARS website.