Experts welcome alignment of tax clearance approvals in new Sars process

The new process for emigration and foreign investment allowance tax clearance approvals has been welcomed. It simplifies the process and removes uncertainty.

The South African Revenue Service (Sars) has introduced a new tax compliance status (TCS) application form that consolidates the foreign investment allowance and emigration applications into the Approval International Transfer (AIT) application.

Exchange control and emigration

The tax authority says in a statement it was necessary to change its own processes and forms following the 2020 announcement of the abolition of emigration as an exchange control concept through the South African Reserve Bank. The abolition took effect in March 2021.

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Sars introduced its new system on 24 April this year and says while it will be easier for compliant taxpayers it will be harder for taxpayers who are unwilling to be compliant.

It has also removed the tender option and the Good Standing TCS must in future be used for all scenarios where third parties want to verify a taxpayer’s tax status. The Good Standing application must be used for tenders as it fulfils the same purpose.

A positive development

Hanneke Farrand, MD of Farrand Global, sees the new form and requirements as a positive development. “This is just the codification and simplification of the legislative changes to the emigration process that was announced in 2020.”

Hugo van Zyl, exchange control and tax specialist, says professionals were informed in October last year that Sars was aligning its processes with the legislative changes. These changes should therefore not be seen as a surprise or as the introduction of a more restrictive exchange control policy.

“We welcome the new process as we have been frustrated because the Sars processes were not aligned with the change in legislation regarding emigration and the ability to make use of the foreign investment allowance.”

The process change is long overdue and should have been in place in February 2022, says Van Zyl.

“With the new consolidated process there is much less confusion about what Sars requires from whom,” he says.

The new form asks three additional questions of taxpayers when requesting tax clearance for the remittance of funds abroad in terms of the AIT.

Sars says the additional information requested on the AIT application will ensure all the tax that should have been paid has been paid. If not, Sars will be able to address any non-compliance through a verification or an audit.

“This forms part of the Sars modernisation journey that aligns to our strategic intent of voluntary compliance,” it says.

Van Zyl adds that the TCS application for the foreign investment allowance also requires taxpayers to indicate whether they are tax resident or non-resident. If they are tax resident, they must provide a worldwide balance sheet of all their assets and liabilities.

This is nothing new, he says. Both Farrand and Van Zyl emphasise that the required supporting documentation in the new process has remained the same.

Sars is of the view that taxpayers applying for more than the yearly R1 million single discretionary allowance are sophisticated taxpayers who should reasonably have records of the cost price of major assets they own.

More legislative changes

The questions about shareholding and trusts also relate to recent changes to legislation aimed at getting South Africa off the Financial Action Task Force’s grey list, such as the Trust Property Control Act.

SA was placed on the list in February because of concerns about the country’s ability to monitor, prevent, and prosecute money laundering and terrorism financing activities. Legislation now requires the keeping of a register of the ultimate beneficial owners of trusts and company structures.

Farrand says the new process comes down to more detailed and targeted requests for information to exit capital. The information requested corresponds with the type of information that is being requested as part of international best practice under the developing reporting and exchange of information requirements, she adds.

This article originally appeared on Moneyweb and was republished with permission. Read the original article here.

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