Sharing wealth can sometimes mean taking on costs, and occasionally it can even put some of those costs on the person you’re trying to gift to. While South Africa won’t tax a non-resident sending funds into the country, there are still reporting procedures that both you and your recipient need to follow.
Gifting money to a South African resident is taxable only if the gifter is also a resident. The Donations Tax, which is a gift tax that the South African Revenue Service (SARS) regulates, is paid by the gifter.
If you live outside of South Africa, it’s likely that neither of you are required to pay taxes in South Africa. You’re not completely out of the woods though; you may be taxed in the US, and your recipient still has to declare the amount they receive.
Currently, South African residents pay a 20% tax rate on the value of donated property that doesn’t exceed ZAR 30 million. The tax increases to 25% if the value of the property donated is above ZAR 30 million. The first ZAR 100,000 of donations is exempt from taxation.
To declare the gift you’re giving, your recipient likely needs to list it on their income tax return form.
Your recipient may also need to fill out a Reporting Mandate if you’ve never sent money to them before.
Because tax regulations can change, it’s important for your recipient to check with a local tax professional to make sure all of the proper amounts are reported and forms are filed.
If your recipient fails to report the gift, they may be hit with an administrative penalty. According to our research, this is a kind of catch-all for many different types of noncompliance issues defined by SARS.
The penalty can cost anywhere from 250 ZAR to 16,000 ZAR for each month that the noncompliance continues — this data is from February 2023.
Your recipient has several options for how they can get the funds you send. Cash pickup, bank deposit and even mobile wallet are available.
Keep in mind that both how you send the funds and how they receive them will affect how much the transfer costs. Check out our guide to learn more about the process and find cash pickup locations in South Africa.
In short, yes. The IRS requires that banks report any and all cash transactions over $10,000, but even transfers as small as $1,000 may be reported by some transfer specialists. Also keep in mind that sending many small transfers may also be reported.
You may need to file one of the following, depending on your circumstances:
Exchange control legislation can limit how much money you can send to South Africa at once. The same legislation limits how much cash can be physically brought into and out of the country.
Outside of legal regulations, banks and transfer services may have their own caps on the maximum amount you can transfer. You’ll need to find a provider without maximums like Xe if you want to avoid further limitations.
Sending money to South Africa comes without tax consequences for the recipient, but they’ll still need to declare it on their income taxes. Before you hit send, you can compare money transfer services and learn more about international transfers to find the provider that fits your needs.
You’ll likely need to file with the IRS, and your recipient may have to pay a gift tax.
Your recipient may need to pay taxes on a large remittance, and you’ll likely need to report it.
Avoid potential headaches and tax issues with our guide to sending $10,000 or more to India.
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Need to send a lot of money to China? Protect yourself from penalties and save time with this tax and documentation guide.
Are you due to receive a large sum of money from another country? Familiarize yourself with laws and required documentation.
I have two questions:
If you receive money from a South African citizen as a gift and it is paid into a South African trust account. What are the tax implications?
If a property is bought from said trust account established in South Africa, what are the tax implications?
Hi Bella,
Thank you for contacting Finder.
The donor is generally responsible for paying the gift tax which can be for permanent resident. After making a donation the donor should fill in form IT144 and submit it to the nearest SARS branch with proof of payment. Donations tax is levied at a flat rate of 20% on the cumulative value of property donated not exceeding R30 million, and at a rate of 25% on the cumulative value exceeding R30 million. Buying a property using the donation from the trust account entails a lot of tax implications such as Transfer Duty, VAT and CGT and Estate Duty.
Please speak to a tax professional to get more details about the tax implication of the donation and property purchase in South Africa.
Hope this helps.
Please feel free to contact us at any time if any other questions arise.
Kind Regards,
Faye