Deceased Estate Tax Certificates

Of late executors are finding it more and more difficult to attend to the tax returns of deceased estates. Since the automation of tax certificates, loading from investment houses through to the SARS system, SARS is now able to determine taxable income in a tax year much quicker. Although this has made testate income tax returns easier to submit, there is a serious fault in the system.

When an individual is deceased, the investment house is meant to produce four tax certificates for each investment in the year of death.

• The deemed Capital Gain/Loss at date of death;
• The earnings for the period from March, of the financial year in the year of death, until the date of death;
• The Capital Gains/Loss for the period after the date of death until the end of the financial year, for the Estate account;
• The earnings for the period after the date of death until the end of the financial year, for the Estate account.

Unfortunately the investment houses systems do not seem to have the capability to generate such tax certificates. They then generate a tax certificate automatically for the full financial year. SARS receives the same and auto assesses the deceased with incorrect figures. If the tax practitioner submits the return prior to SARS’s estimate, a full audit ensues, even though the tax number is coded as an estate. The auditors often have difficulty understanding why the submitted return does not agree to the tax certificates from the investment house. And so a debate ensues with the SARS auditor, while one tries to involve the SARS Estates department to bring reason and logic to the assessment.

Further complications ensue on the SARS efiling assessments, as they do not recognise a coded Estate, thus incorrectly carrying forward Capital losses to future years, even though reason would determine that there is no future year of a deceased person. Basic there is a glitch in the Estates matrix

Delays from third parties on winding up estates:

• Investment houses trying to produce deemed disposal of the deceased at date of death, approximately 1 year;
• SARS Audit 90 working days, which is 6 months;
• Wasted time speaking to call centres, endless.

South Africa is suffering from a serious software deficiency and systematics to handle deceased estates efficiently. We continue to raise the concern at all levels, with all investment houses and SARS, with the hope that they will understand the tax implications of a deceased estate and implement proper systems to alleviate time and stress from executors and families of lost loved ones. Let us hope the software developers can come up with a plan soon.