Enhancements to the Tax Compliance Status process and externalising funds abroad

On 24 April 2023 the South African Revenue Service (SARS) announced enhancements to the Tax Compliance Status (TCS) process with immediate effect. The changes apply to persons (resident or non-resident) requesting their Tax Compliance Status certificates from SARS in order to externalise funds abroad.

The new, more comprehensive TCS process, now features a new dynamic application called the “Approved International Transfer (AIT)”, which replaces the former “Emigration” and “Foreign Investment Allowance (FIA)” application types. The new AIT process is effective immediately, although existing applications which were submitted before the change will be finalised under the old process.

Apart from the new name of the application, an important further change is that the information that was previously requested as additional information by SARS, must now be provided upfront when submitting the application. It is expected that as before, SARS will still perform enhanced due diligence for applications exceeding R10 million. No change was made to the amounts that can be externalised. The R1 million single discretionary allowance also still requires no approval from SARS.

Supporting documents for Approval of International Transfers (AIT) include:

• Relevant material that demonstrates the source of the capital to be invested.
• Statement of assets and liabilities for the previous three tax years:
  • This should include disclosure of all investments, loan accounts and distributions from local and foreign companies, trusts, etc.
  • Local and foreign assets and liabilities should be listed separately.
• Non-residents:
  • Relevant proof that the taxpayer has ceased to be a tax resident in South Africa, including the date on which the taxpayer ceased to be a resident is required to be submitted.
  • A detailed Capital Gains Tax Calculation schedule relating to any tax payable on deemed disposal of assets on the day before the taxpayer ceased to be a tax resident.
  • Restrictions relating to the transfer of pension and annuity income remains the same, wherein payment of lump sum benefits to taxpayers shall only be allowed if they remained non-resident for at least three consecutive years.
• Further disclosures (applicable to both local and foreign trusts and companies) include:
• • Whether you are a beneficiary of a trust.
  • Whether you are a shareholder of a company, and
  • Whether you have any loans to a trust.

Although the documentary and disclosure requirements have been made more onerous, it is intended to make the process more seamless for compliant taxpayers. The standard turnaround time for the finalisation of AIT applications is currently 21 business days from the date of submission.

Should you have any questions on the new regulations in Exchange Control, please contact Jan Louis Koen at janlouis@asl.co.za.