The Davis Tax Committee (“DTC”) released its much-anticipated second (and final) interim report (the “Report”) on estate duty on 24 August 2016. The Report has been published with amendments taking into account the public’s comments that were submitted in respect of the first interim report.

The most significant recommendations of the Report pertaining to estate duty and donations tax are highlighted below. Many of these recommendations involve a comprehensive overhaul of the various tax exemptions applicable to transfers of assets between spouses.

Estate duty

The Report recommends that the primary abatement should be significantly increased from ZAR3.5-million to ZAR15-million for all taxpayers, irrespective of their relationship status, and that the inter-spouse abatement in the Estate Duty Act should be withdrawn.

The Report notes that the primary abatement has not been increased since 1 March 2007, thus allowing a substantial element of fiscal drag to enter the estate duty system. As a result, there is an urgent need for a generous increase in this abatement.

The Report also recommends that the rate of estate duty should be increased from 20% to 25% of the dutiable value of a deceased estate that exceeds ZAR30-million, thus introducing a progressive system of tax rates for estates with a net dutiable value of more than ZAR15-million and mitigating the potential loss of estate duty collections in light of the other estate duty recommendations.

Capital gains tax

The Report recommends that if the DTC’s estate duty recommendations are implemented, the capital gains tax rollover provisions applicable to the transfer of assets between spouses should be repealed and replaced with an increased exemption on death of ZAR1-million (currently ZAR300 000).

Donations tax

The Report recommends that if the inter-spouse abatements and exemptions are removed for estate duty and capital gains tax purposes, the inter-spouse exemption within the donations tax system should also be removed, except for an exemption for the reasonable maintenance of the taxpayer and his/her family.

In this regard, the Report recommends that the inter-spouse donations tax exemption should not apply to the transfer of assets that would be subject to capital gains tax. In addition, the Report recommends that, rather than imposing a monetary threshold to limit the tax-free transfers of cash between spouses, the donations tax exemption for cash transfers should be limited to cash donations which do not create an enduring benefit for the recipient spouse, ie donations of cash between spouses would remain exempt from donations tax to the extent that such amounts are expended in the maintenance of a family within one year of receipt.

In addition, it is recommended that assets transferred between spouses in terms of a divorce order should be subject to an exemption similar to the death benefit exemption for estate duty and capital gains tax, but that the use of this exemption should reduce the taxpayer’s available death benefit abatements or any subsequent divorce exemptions.

Another recommendation of the Report is that donations made in anticipation of death should no longer be exempt from donations tax.


The Report acknowledges that the DTC’s recommendations are advisory in nature and any legislative amendments will be subject to the normal consultative processes and parliamentary oversight. In addition, as agreed with the Minister of Finance, the DTC will submit a further report on a possible wealth tax for South Africa. It is clear that DTC’s recommendations will have significant implications for personal planning and local trusts if they are implemented.