Here is some clarification regarding recent enhancements made by SARS to the Tax Compliance Status (TCS) process, effective 24 April 2023, to align with international standards and modernise the TCS system.
These changes impact the tax clearance application process in respect of foreign investments and emigration. There has been much confusion as a result of the changes, however, in essence, the effect is merely a change in process and not in regulation. SARS has introduced a new application called ‘Approved International Transfer (AIT)’ that replaces the existing ‘Emigration’ and ‘Foreign Investment Allowance (FIA)’ application types, effectively making these one and the same.
NOTE: Previously SARS required proof of: a) Source of Income
b) Proof of Funds
c) 3 years Balance Sheets
The new AIT application now requires the submission of additional supporting documentation when applying for TCS status in respect of international transfers, including:
Statement of assets and liabilities for the previous three years to now be split between local and foreign and to include distributions received.
Whether the applicant is a South African tax resident or not.
Whether the applicant is a beneficiary of a local or foreign trust.
Whether the applicant has an interest in any local or foreign entity (either directly or indirectly) of 20% or more.
Whether the applicant has any loans held in local or foreign trusts.
The capital gains tax effect of any sales linked to source of funds
SARS has also released a guide to inform taxpayers about this new process, which can be accessed here.
Whilst these changes are extensive, this is merely a change in process and not in regulation. However, this does highlight the importance of having an offshore investment allocation, as part of your wealth management strategy and using the annual R1m that is available to you. When using the new AIT, it is important to ensure that both you and any Trusts and companies in which you hold an interest, are compliant with SARS.
It is also important that all transactions such as the sale of properties and businesses, as well as inheritances and donations received have been disclosed. This is where a multi-Family Office wealth management and accounting business can assist clients in maintaining records, so that the AIT process can be as simple as possible.
We at Private Client Holdings remain committed to providing the necessary support and guidance to help you navigate these changes and are able to assist any clients with tax clearance in respect of foreign investments, and with the additional information that is required in order to apply on the client’s behalf.
Should you have any queries or require further information relating to the changes, please do not hesitate to contact Sue Blake and the Private Client Tax team on tax@privateclient.co.za or PCH wealth manager Luke Hirst CFP® luke@privateclient.co.za or call 021 671 1220. Visit www.privateclient.co.za for more details about the Private Client Holdings multi-Family Office approach to wealth management.