Buy Sell Agreement Life Insurance Tax Implications South Africa

With regard to the purchase and sale contract, the purchase price of the deceased`s interest or the “selling interest” related to the agreement are greater: the premiums were paid by the companies, but then taken from the credit account of each company in each company. According to Meyerowitz, “a premium is paid or borne by the deceased, either directly or indirectly by someone else on his behalf, or for which he is required to pay someone the amount of the premium… In this case, the premiums for the deceased`s life policy were deducted from the survivor`s credit account. Section 3 (a) of the Estate Duty Act, Estate Duty Act 1955, contains the proceeds of life insurance on the life of the deceased as “as property” of the deceased estate, if it meets the requirements of this section, regardless of who owns the policy or who has paid the premiums. However, not all revenues are always included in relation to these provisions. The section also provides that where interest is not recovered by the estate but by the corporation and the company has also paid the premiums, only the amount for which the proceeds exceeds the total amount of premiums paid, plus interest, is considered to be the property of the deceased estate. However, section 3, paragraph 3, point (a) (ii) of the Inheritance Tax Act provides for a property tax exemption for these policies, so that they are not considered the property of the deceased estate, provided that all the conditions for the application of the exemption are met. If this is the case, inheritance tax is not levied on the proceeds of the policy. The value of a company depends in large part on the contribution of important employees or partners in the company. The sudden loss of a key person can seriously endanger the business. As such, a key figure can be considered someone whose absence (due to death, disability or critical illness) will have major negative effects on the future of the company. Key human insurance is designed to protect the company in the event of the premature death of a key person or a person with a disability or a seriously ill person. Such a policy is assumed and paid for by the company and after death, a disability or critical illness of the key person (who may or may not be a shareholder) by the company, the proceeds of the policy are paid to the company (not to the estate that died in the event of the person`s death). This will allow the company to obtain cash flow to allow the company to continue its operations while obtaining an appropriate replacement.

First of all, it should be noted that the purchase and sale contract is not a provision of the statutes, the declaration of foundation, the association agreement or the rules of the company, or whether the value of the shares of the deceased or another member must be determined in accordance with point (ii) or disposition (ii). , from Section 5(1)) (f) to If this is the case, a provision of the association contract or the rules of the company is not taken into account, determining, among other things, the value of the shares of the deceased or another member. Estate Duty Act 45 of 1955 describes how life insurance and buy-back and sale agreements are taxed. Life insurance is generally part of the tax purpose of the deceased estate and inheritance tax is collected within the meaning of the law. Article 3, paragraph 3, of the Act states that “any sum owed and recoverable under an insurance policy which is the national life policy of the deceased is considered the “property” of the deceased and is subject to estate tax in the sublime estate.” This means, says Schalk Malan, Executive Director of BrightRock, that after the death of an insurance taker, the end-of-house pension is part of the tax cut. It is important to remember that purchase and sale policies are exempt from this tax, he adds, if certain conditions are met. Section 3, paragraph 3, point (a) of the Act states that section 3, paragraph 3, is not applicable if: – The policy was withdrawn by a person (company, CC or trustee) who was loyal to the company at the time of the deceased`s associated death (co-partner);