The South African Revenue Service (SARS) announced that, as of 24 April, a new enhanced Tax Compliance Status (TCS) application form was being introduced "to facilitate the consolidation of Foreign Investment Allowance (FIA) and Emigration applications into a single application – the 'Approval for International Transfer' (AIT)."
No TCS is required for transfers by residents up to the yearly ZAR1 million single discretionary allowance, but SARS said that anyone applying for sums above this threshold would be 'sophisticated taxpayers' who should "reasonably have records of the cost price of major assets they own".
Previously, a person, whether a 'resident' or 'non-resident' of South Africa, was required to obtain a Tax Compliance Status (TCS) Pin from SARS – either an 'FIA TCS Pin or an 'Emigration TCS Pin. To do so they were required to disclose their local assets and liabilities for the previous three years. Under the new AIT Pin, taxpayers are also required to disclose their foreign assets and liabilities to SARS.
Every asset listed on the Local and Foreign Assets and Liabilities forms has to be allocated a value and at cost, which will be subject to further verification by SARS. A further new requirement is to provide information as to the source of the funds that were used to acquire all assets.
This includes local and foreign fixed properties, listed/unlisted investments, crypto assets and cash in bank. If an applicant taxpayer does not own a particular type of asset, this will be captured as zero on the asset and liability part of the application form. Further questions include whether the applicant taxpayer is a beneficiary of any trust or has made any loans to a trust.
SARS said the change supported its strategic objective of making taxpayer compliance easier and would entrench the TCS verification process across government, the private sector and individual taxpayers.
"Whilst for compliant taxpayers this makes it easy, it will be harder for taxpayers who are unwilling to comply," said SARS. "The enhanced TCS system also aims to dramatically improve turnaround times for taxpayers and traders that are compliant."
SARS said the additional information requested on the AIT application form would allow it to ensure that all required tax payable has been accounted for and, if required, address any non-compliance that was detected through a verification and/or an audit.
In addition, the 'Tender' option has been removed and the 'Good Standing' TCS must now be used for all other scenarios where a third-party wants to verify a taxpayer's status. Prior to requesting a TCS, non-resident South Africans are required to have completed the 'Cease to be a Resident' process.
"This new process will require a lot more effort on the part of applicants to put a request together for an AIT," said Coreen van der Merwe, Director of Sovereign Trust (SA) Ltd. "Sufficient time will need to be allowed for the collation of information, as well as the processing of the request. Frustration is to be expected. This is probably just the beginning of government efforts to slow down or prevent the continued offshoring of capital from South Africa."
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