The South African Revenue Service (SARS) has made substantial changes for those looking to transfer money out of the country.
According to Lovemore Ndlovu from Tax Consulting SA, in April, SARS updated its Tax Compliance Status (TCS) process, which mainly looks at the approvals that individuals needed when transferring funds out of South Africa.
The taxman has now made further changes to the system, effective 30 October.
A tax resident looking to transfer more than R1 million in a calendar year will need a TCS pin from SARS under the category “Approval International Transfer” (“AIT”). Non-residents will require an AIT approval for all capital remitted.
In the past, taxpayers would require TCS approval from SARS based on emigration or through their Foreign Investment Allowance.
In April, these application types were subsumed into the AIT TCS process, demanding taxpayers to explain their tax residency status as well as any major new information requirements, such as a disclosure of a taxpayer’s local and foreign assets and liabilities to SARS.
On 30 October, SARS said that it changed the AIT TCS PIN process after engagements with stakeholders, with the tax collector stating that new changes will improve the efficiency and accuracy of the AIT TCS PIN process.
In the previous system, a taxpayer’s foreign assets and liabilities were a compulsory part of the application to SARS.
“However, it remained in question whether SARS was entitled to request such information in cases where the taxpayer was already a non-resident for a period of time,” Ndlovu said.
In the new system, all fields under the “Foreign Assets and Liabilities Details” are optional, depending on when the taxpayer ceased their South African tax residency.
As per the new guide, this will apply to South Africans who ended their tax residency in South Africa five years prior to the implementation of the AIT TCS PIN application.
In addition, when a taxpayer has received AIT approval, the associated document (PIN) will show the residency status under which the application was approved, which SARS said will ensure transparency and accountability.
Moreover, when an AIT TCS PIN approval is granted, the authorised dealer (such as a bank) has to ensure that the taxpayer has permission to make the international payment – this can be done through verifying the AIT TCS PIN or e-Filing.
“With this in mind, one of the new changes made to the AIT process is the addition of an “Amount” column added to the TCS verification dashboard. According to SARS, this enables AIT TCS PIN approvers and reviewers to view the total value of the international transfer per the AIT TCS PIN application made, including in cases where the application has not yet been approved,” Ndlovu said.
This creates a more thorough view of the financial data associated with the AIT TCS PIN application, allowing for better decisions to be made.
SARS has also amended the AIT TCS PIN application process to replace the “Net Worth” field with the “Net Amount” under the “Assets and Liabilities Details” section in the application form.
“This appears to provide a clearer understanding of the information being requested, as it is not accurate to classify one’s net worth based on the cost value of their assets,” Ndlovu added.
The “Trust No.” and “Passport No. of Main Trustee/Representative Taxpayer of the Trust” fields in the “Local and Foreign Trust Details” section and the Local and Foreign Loan to a Trust Details” section have also been made optional. This will make it simpler for those involved in foreign trusts.
The “Trust No.” field in “Distribution from Trust Additional Details” section is also now optional when “Foreign Trust” is specified, allowing for greater flexibility when dealing with foreign trusts.
Finally, the “Share code” and “Number of shares sold” fields have been disabled where “Listed Shares” is selected as the source of the transfer in the “Sale of Shares and Other Securities Details” section.
“One would agree that the latest adjustments made by SARS demonstrate a proactive approach to addressing stakeholder feedback and ensuring a more user-friendly and robust TCS approval system,” Ndlovu said.
“However, the level of detail required by SARS in AIT TCS PIN applications still begs unwavering accuracy in the disclosures made, especially given the criminal implications which underpin false declarations made (whether intentional or negligent), for both taxpayers and tax practitioners alike.”