Last month, the South African Revenue Service (SARS) implemented new changes to the tax clearance process for individual cross-border capital flows.
FNB provided a notice that clearly explained the tax clearance process changes and why it was necessary.
These changes are essentially system enhancements to align the tax clearance processes and make compliance easier.
In February 2020, the Finance Minister announced a move from exchange controls to capital flow management measures to regulate cross-border capital flows.
He also announced that emigration as an exchange control concept would be phased out over 12 months.
This modernisation process aimed to treat all South African individuals the same, regardless of where they live. Emigration was ultimately phased out in March 2021.
SARS has now implemented further system changes to align the tax clearance processes applicable to the foreign investment and emigration allowances.
Part of these changes includes adjusting the definition of what it means to be tax compliant and will focus on continuous tax compliance enhancements.
The ‘Approval of International Transfer’ (AIT) replaces the existing ‘Emigration’ and ‘Foreign Investment Allowance’ (FIA) application types.
An important change to the process is the additional information SARS now requires as part of the AIT, including confirmation of the following:
- Statements of assets and liabilities must be split between foreign and local.
- Tax status (resident or non-resident).
- Are you a beneficiary of a trust (foreign or local)?
- Do you have a shareholding (directly or indirectly) in any legal entity of 20% or more (foreign or local)?
- Have you made a loan to a trust (local or foreign)?
Previously, the FIA of R10 million required the completion of a SARS FIA001 Form. This would generate a Tax Compliance Status (TCS) PIN for foreign investment.
Emigrants followed a similar process but would be issued a TCS PIN for emigration. This has now been consolidated into a single clearance process, the AIT.
The above changes apply to the tax clearance process, and it is important to note that no changes have been made on the Exchange Control side.
The allowances applicable to South African resident individuals, as well as emigrants, remain unchanged.
- The R1 million Single Discretionary Allowance is available annually to all South African resident individuals 18 years and older. It is only available to emigrants in the calendar year they leave South Africa.
- Any further capital transfers for residents or emigrants require tax clearance in terms of the AIT process. SARB approval is also required for applications of more than R10 million.
The new process applies to new applications and does not impact tax clearances that have already been issued.