After a lengthy delay, SARS has provided clarity on the new process for transferring funds out of South Africa. Sentinel’s Michelle Tickner unpacks how the changes are likely to affect both tax residents and tax non-residents.

On 24 April 2023, the South African Revenue Service (SARS) published its long-awaited changes to the Tax Compliance Status (TCS) process. These changes will directly impact taxpayers seeking to transfer funds out of South Africa. The most significant change is that the Approval for International Transfer (AIT) form now caters for both tax residents and tax non-residents on the same form. 

What used to be separate processes (the process for acquiring an Emigration TCS Pin and the process for acquiring a Foreign Investment Allowances TCS Pin) have been replaced with a single process to acquire an AIT Pin. 

This change confirms our understanding that you do not need to emigrate for South African Reserve Bank (SARB) purposes at the time of becoming a tax non-resident of South Africa to obtain an AIT Pin. It also confirms our understanding that the former Emigration TCS Pin was not required to prove tax non-residency, but was instead only required once a tax non-resident wanted to transfer capital abroad.

Requirements of Tax Residents

The differences between the old and new processes are summarized below. This applies to SA tax residents applying to invest their capital allowance abroad (currently up to R10 million per calendar year).

Old process (up to 23 April 2023)	New process (after 24 April 2023)	Changes
1.  Complete form FIA001 under tax status TAB on eFiling.	1.  Complete form AIT under tax status TAB on eFiling.	New form
2.  Enclose the relevant information to demonstrate the source of capital to be invested. For more information regarding the supporting documents required, click here.	2.   Enclose the relevant information to demonstrate the source of capital to be invested. For more information regarding the supporting documents required, click here.	Requirements for supporting documents are more stringent (e.g. documents may not be older than 1 month instead of previous requirement of 3 months).
3.  Statement of assets and liabilities for the previous three tax years (list local and foreign assets and liabilities).	3.  Statement of assets and liabilities for the previous three tax years (list local and foreign assets and liabilities).	No change
4.  No specific questions, but shareholding was usually disclosed in the statement of assets and liabilities and sometimes included in the supporting documents to prove source of funds.	4.  Specific questions on the application form asking whether you are a beneficiary of a local or foreign trust and whether you have more than 10% shareholding (direct or indirect) in any local or foreign legal entity.	New questions to answer on the form. More disclosure required.
5.  No specific questions, but loan accounts previously disclosed in the statement of assets and liabilities and sometimes included in the supporting documents to prove source of funds.	5.  Specific question on the application form regarding existing loan(s) to local or foreign trust(s).	New questions to answer on the form. More disclosure required.
6.  No specific questions, but sale of shares, sale of crypto assets and transfer of listed securities previously included in the supporting documents to prove source of funds.	6.  Specific questions on the sale of shares, sale of crypto assets and transfer of listed securities including possible capital gains tax implications on the applicable transfer.	New questions to answer on the form. More disclosure required.
7.  Applicable Power of Attorney where the TCS is submitted by a person other than the taxpayer.	7.  Applicable Power of Attorney where the AIT is submitted by a person other than the taxpayer.	No change

Important points to note

1. Tax residents may apply, by way of a special application, to transfer amounts exceeding R10 million abroad. The same AIT form must be completed to facilitate the transfer in excess of R10 million.
2. The R1 million annual non-discretionary allowance is still available to tax residents (over and above the R10 million annual capital allowance).

Requirements of Non-Tax Residents

The differences between the old and new processes are summarized below. This applies to tax non-residents applying to transfer either a portion of or all of their remaining local funds abroad.

Old process (up to 23 April 2023)	New process (after 24 April 2023)	Changes
1.  Complete form Emigration TCS under tax status TAB on eFiling.	1.  Complete form AIT under tax status TAB on eFiling.	New form
2.  Enclose the relevant information to demonstrate the source of capital to be invested. For more information regarding the supporting documents required, click here.	2.  Enclose the relevant information to demonstrate the source of capital to be invested. For more information regarding the supporting documents required, click here.	Requirements for supporting documents are more stringent (e.g. documents may not be older than 1 month instead of previous requirement of 3 months).
3.  Statement of assets and liabilities for the previous three tax years (list local and foreign assets and liabilities).	3.  Statement of assets and liabilities for the previous three tax years (list local and foreign assets and liabilities).	No change
4.  Proof that the taxpayer has ceased to be a resident for tax purposes in South Africa, showing the date they became a tax non-resident.	4.  Proof that the taxpayer has ceased to be a resident for tax purposes in South Africa, showing the date they became a tax non-resident.	No change
5.  Detailed capital gains tax calculation schedule relating to any tax payable on deemed disposal of assets on the day before the taxpayer ceased to be a tax resident, in accordance with s9(H)(2) of the ITA.	5.  Detailed capital gains tax calculation schedule relating to any tax payable on deemed disposal of assets on the day before the taxpayer ceased to be a tax resident, in accordance with s9(H)(2) of the ITA.	No change
6.  If the non-resident application is for a family unit and one or more members of the family unit are registered for tax purposes, they must apply separately for their TCS Pins.	6.   If the non-resident application is for a family unit and one or more members of the family unit are registered for tax purposes, they must apply separately for their TCS Pins.	No change
7.  No specific questions, but shareholding was usually disclosed in the statement of assets and liabilities and sometimes included in the supporting documents to prove source of funds as per bullet point 2 above.	7.  Specific questions on the application form asking whether you are a beneficiary of a local or foreign trust and whether you have more than 10% shareholding (direct or indirect) in any local or foreign legal entity.	New questions to answer on the form. More disclosure required.
8.  No specific questions, but loan accounts previously disclosed in the statement of assets and liabilities and sometimes included in the supporting documents to prove source of funds as per bullet point 2 above.	8.  Specific question on the application form regarding existing loan(s) to local or foreign trust(s).	New questions to answer on the form. More disclosure required.
9.  No specific questions, but sale of shares, sale of crypto assets and transfer of listed securities previously included in the supporting documents to prove source of funds as per bullet point 2 above.	9.  Specific questions on the sale of shares, sale of crypto assets and transfer of listed securities including possible capital gains tax implications on the applicable transfer.	New questions to answer on the form. More disclosure required.
10.  Applicable Power of Attorney where the TCS is submitted by a person other than the taxpayer.	10.  Applicable Power of Attorney where the AIT is submitted by a person other than the taxpayer.	No change

Important points to note

1. Tax non-residents seeking to withdraw funds from retirement funds (pension, preservation, provident and retirement annuity funds) must be aware that payment of lump sum benefits will only be allowed if the individual member has remained a tax non-resident for at least three consecutive years. Application must be made via the AIT system to transfer such funds abroad and all AIT applications are subject to the requirements listed above. Tax non-residents should familiarize themselves with the tax implications of withdrawing or retiring from these funds, as your tax non-residency status does not necessarily exempt you from normal income tax requirements. These funds are usually subject to the retirement or withdrawal benefit lump sum tax tables.
2. The R1 million annual non-discretionary allowance is not available to tax non-residents.

Teething problems and considerations

We have had issues with recent TCS applications submitted to SARS prior to 24 April 2023. Many of the applications submitted under the old process have been declined on the basis that the new process needs to be followed. Our tax compliance department has been kept busy with re-submissions. This has caused several delays in the finalization of offshore capital transfers.

SARS has shortened the proof of funds period to 1 month from 3 months. This puts pressure on financial institutions, trust administrators etc. to furnish up-to-date information without delay.  

National Treasury has initiated a more stringent verification and risk management process, which will also impact taxpayers if they are subjected to a future SARS audit. From previous experience, we have noted that SARS is checking the “future income and asset growth predicted” and “asset and liability” details submitted on the application forms against current income and asset liability disclosures. In some cases, SARS has questioned income disclosure in later tax years, based on past year predictions or disclosures made on the application form to remit funds abroad.

The bottom line

The changes to the TCS/AIT process have added a more onerous disclosure burden on persons seeking to transfer funds out of South Africa. Taxpayers and Tax Practitioners are cautioned to ensure that all information provided is accurate and that the application is completed carefully. 

There’s been a lot of miscommunication in the press about what has and hasn’t changed and it’s important that persons seeking to take capital out of South Africa and their various advisers should understand the correct processes to follow and partner with experienced professionals in this field.

Please don’t hesitate to contact Sentinel International Advisory Services for any assistance in this regard.

Author: Michelle Tickner

Senior Tax Specialist