Last week, The South African Revenue Service (SARS) announced some adjustments to its Tax Compliance Status Process for individual taxpayers specifically wanting to make use of their R10 million Foreign Investment Allowances (FIA) to transfer funds offshore.
 
Since the announcement was made, there seems to be some uncertainty from our clients surrounding the changes implemented, however we wish to reassure you that the revisions made by SARS are simply a change in the application process and not a change in allowance regulations. 

As per previous tax years, South African ‘tax residents’ are still permitted to transfer up to R1 million abroad under the Single Discretionary Allowance (SDA) before needing pre-approval from SARS, whilst for additional funds being transferred within the same calendar year, individuals still require a Foreign Tax Clearance Certificate, along with Tax Compliance Status (or "TCS") Pin from SARS under their Foreign Investment Allowance (FIA). As for ‘non-tax-residents’ clearance is required for any funds transferred offshore each year.

What this ultimately means is that regardless of whether an individual is a "resident" or a "non-resident", you will need to obtain a Tax Compliance Status (or "TCS") Pin from SARS.

What exactly has SARS changed?

Previously, SARS made provision for two types of TCS pins, namely an “Emigration” and a “Foreign Investment Allowance” (“FIA”) TCS pin. Going forward and in an endeavour to simplify the tax compliance process, these two pins are now, effectively, one and the same, called an "Approval for International Transfer" or "AIT".

Additionally, there have also been some changes to the information requirements that must be submitted along with the AIT application. These include the following:

• First and foremost a disclosure must be made as to whether the taxpayer is considered to be a "resident" or a "non-resident" for South African tax purposes. Where a "non-resident" is selected, SARS will require that a Notice of Non-Resident Tax Status is submitted.
• Supporting documentation showing the source* of funds for the investment.
• A statement of assets and liabilities for the previous three years for both local and foreign assets.
• Applicant to declare trust beneficiary status (local or foreign), if they have more than 20% shareholding in local or foreign companies (directly or indirectly), or any loans in local or foreign trusts.
• A detailed Capital Gains Tax Calculation schedule mentioning tax payable on deemed disposal of assets on the day before the taxpayer ceased to be a tax resident (if applicable)

*Source of funds can include: cash or savings, distributions from a trust, donations, dividends from a company, inheritance, loans, sale of property, sale of shares and other securities, sale of crypto assets, transfer of listed securities

While the changes to the TCS requirements were unexpected, it is important to note that failure to comply with the new AIT application process may result in a delay of your tax clearance certificate.

As always our team of tax and exchange control specialists are on hand to help navigate the new application process with you and are available answer any other questions you may have.

For access to the updated SARS AIT Application pack click here.