Approval of International Transfer (AIT) refers to consent granted by SARS for transferring funds out of South Africa. While this seems straight-forward, the processes involved for obtaining such consent are rather complex.
Fin Select gives you the scoop on AIT and how the new Tax Compliance Status (TCS) protocols work.
Demystifying Tax Compliance and AIT
We can’t possibly cover all processes and requirements around Approval of International Transfer in one article, but hope to give you an overview below. Fin Select will upload and update content around this complex topic over time. If you have any questions not answered below, please reach out to us on admin@finselect.co.nz.
1. Is AIT the same as exchange control?
Approval for International Transfer is similar to exchange control which imposed by SARB in the past, but it’s not entirely the same. The greatest difference is that SARS facilitates AIT, while exchange control was managed by the SARB.
Before March 2021 South Africans who wanted to transfer funds abroad could follow two routes:
- Use their R1-million Single Discretionary Allowance or R10-million Foreign Investment Allowance to transfer funds abroad.
- Apply for financial emgration facilitated jointly by the SARB and SARS to sever their tax obligations to SA.
When the SARB scrapped exchange control they also ceded their role as primary custodian of cross-border finance to SARS. The tax regulator subsequently employed new measures to ensure compliance from South African tax residents and emigrants.
2. Does AIT apply to all offshore fund transfers?
No. The new processes implemented by SARS has essentially regrouped tax compliance protocols.
- The R1-million SDA does not require AIT
- The R10-million FIA and to individuals applying for tax emigration
- Fund transfers within the Common Monetary Area (South Africa, eSwatini, Lesotho and Namibia) don’t require AIT.
Funds used for FIA purposes may not be reinvested or used for loans in the CMA as this will create an investment loop.
3. Is TCS the same as a tax clearance certificate?
Not exactly.
The TCS System introduced in 2015 formerly allowed the issuing of tax clearance certificates. The processes and applications of TCS have changed dramatically of late. The enhanced system – introduced in August 2023 – introduced some major changes.
- SARS no longer issues tax clearance certificates and issues TCS PINs to confirm tax compliance.
- The new system groups TCS PINs for
- Foreign investment: SA taxpayers who want to use their FIAs, and
- Good Standing: expats who want to confirm their non-resident status for tax purposes.
4. What’s different about the new TCS system?
There are numerous diffferences between the old and new TCS system, including:
- TCS is fully electronic and facilitated via the SARS online query system (SOQS) on eFiling.
- The list of criteria for TCS has changed significantly
- Fund and asset definitions have been amended
- Tax practitioners or individuals managing TCS on behalf of a client now requires power of attorney. (The previous process also required approval, but was less formal)
5. What are some of the new requirements?
Resident and non-resident taxpayers need to:
- Provide documentation proving the source of capital
- Provide a statement of assets and liabilities for the previous 3 tax years
- Give details of locally-listed securities tol be transfered
Additionally, non-residents for tax purposes also need to:
- Provide proof that they ceased to be a resident for tax purposes
- A Capital Gainst Tax (CGT) Calculation schedule determined at the time of ceasing residency. (Section 9(H)(2) of the Income Tax Act).
- File individual applications for each member of a family unit registered for tax in SA
6. What if I emigrated years ago?
SARS updated their TCS policies on 30 October 2023 to address concerns by individuals who’ve been abroad for several years. The updated regulation states:
“If the date you ceased to be a SA tax resident is greater than 5 years, the Foreign Assets and Liabilities Details container will be optional for completion.”
SARS Statement – SARS TCS Guide, October 2023.
Although this section is optional, individuals still need to prove their complaince with local and/or foreign tax bodies as applicable.
7. Are there noteworthy changes to asset definitions?
Yes, there are some significant changes to certain definitions. Though this is applicable to AIT, changes apply to tax treatment of assets and funds in general.
- Pension, pension preservation and retirement annuity funds were redefined to allow more uniform treatment.
- The Intergovernment Fintech Working Group (IFWG) updated definitions and regulations for crypto-assets.
- Income from crypto transactions fall under revenue (gross income) or capital (CGT), determined on a case-by-case basis.
- Crypto-currency expense claims are allowed if incurred in the production of taxpayer’s income and for purpose of trade.
- Barter-transaction rules apply for goods and services exchanged for crypto.
There are other noteworthy updates which we’ll touch on in our next articles.
8. How does SARS track compliance?
The Automatic Exchange of Information (AEOI) is a multinational tax administration co-operative between participant members of the Organisation for Economic Co-Operation and Development (OECD). This co-op requires all members to disclose financial information of individuals and businesses within their respective jurisdictions.
The initiative aims to eliminate tax evasion and money laundering, while also clamping down on funds used for criminal purposes by terrorist organisations.
SARS receives information about taxpayers, businesses, trusts and trade across borders, and this information does not require approval by the respective entities or individuals. The tax regulator does have to jump through a few hoops for certain information (such as regions formerly considered tax havens), but even places like Switzerland and the Cayman Islands comply with AEOI protocols.
9. Can I challenge or query the TCS system?
Everyone has the right to challenge or query regulations in South Africa – including the TCS system. These rights extend to South Africans living abroad – whether or not they’ve ceased tax residency.
But there are significant hurdles to challenging SARS:
- The new TCS system prepopulates information on eFiling based on AEOI input, previous tax filings and other data.
- The ‘My Compliance Status’ platform limits online capacity for amending or challenging data. Some information can only be queried or changed manually at SARS offices.
- The system currently offers limited options for transactions – such as paying penalties or receiving rebates.
10. Can I complete the TCS process on my own?
You certainly can, but it would be better to entrust the application to someone who understands the requirements and processes.
- Filing for TCS when tax compliance is out of date could lead to an audit irrespective of voluntary disclosure applications.
- Using your AIT for FIA purposes can conflict with tax emigration for individuals who need to wait out their 3-year period. (We’ll cover the three-year lockdown period for confirming non-resident tax status in coming articles).
- Non-compliance can prevent you from obtaining credit, opening accounts or establishing new businesses abroad since foreign FSPs need to verify tax compliance.
Trust the experts with your AIT application
Fin Select is an authorised financial services provider with offices in South Africa and New Zealand. We’ve extensive knowledge of cross-border finance and compliance.
We can assist in confirming your tax residency, facilitate tax emigration and administer the AIT process as well as forex and fund transfers to and from SA on your behalf.
Complete your details here, and we’ll contact you for a free consultation.
Content disclaimer:
Fin Select New Zealand is a subsidiary of Fin Select (Pty) Ltd, an authorised financial services provider licensed by the Financial Sector Conduct Authority and the South African Reserve Bank. We are authorised to deal with various authorised dealers. FSP No. 46307.
Content provided in these articles does not constitute financial services or advice. Views expressed in the articles are those of our freelance writers and not those of Fin Select or our affiliates.
While every effort is made to verify information before publication, accuracy cannot be guaranteed and the reader is urged to consult reputable sources to confirm such at the time of reading.
Sources:
- Intergovernmental Fintech Working Group
- The South African Reserve Bank
- The South African Revenue Service
- Fidelis Vox
- Organisation for Economic Cooperation and Development
- Fin Select South Africa