Chief Masters Directive 3 of 2009 1.
SARS has no objection to the allowance of the VAT claimed by the agent of the executor as a liability for estate duty purposes. However, the final decision to allow or disallow such costs as administration costs lies with the Master's office in terms of section 4(c) of the Act.
As a general rule, the expenses incurred by the executor in administering an estate are not allowed to be charged out of the estate, because these expenses are regarded as being included in the executor's remuneration. If, however, these expenses are heavy or are disproportionate to the remuneration received the Master may allow the executor to charge additional remuneration to cover such expenses. See Meyerowitz on Administration of Estates and Estate Duty, 2007 edition, par 14.
It is practice that the Masters office requires from nominated executors to be assisted by attorneys, accountants or trust companies (the agent) in the finalization of estates. Where such an agent is a registered VAT vendor he or she is obliged to charge VAT for his or her services to the executor.
The VAT charged by the agent is therefore an expense necessarily incurred by the executor in the performance of his duties. If the VAT is not allowed by the Master as such the executor will be out of pocket.
In light of the above, the Master must allow VAT charged by the agent as additional remuneration in terms of section 51(3)(a) of the Administration of Estates Act, 66 of 1965.
Where the executor who is not registered for VAT receives a part of the fee it should be reflected separately in the liquidation and distribution account.