The new Approval for International Transfer Pin (AIT)

The new Approval for International Transfer Pin (AIT)

Business, Human Resources, Tax

On the 24th April, SARS released new enhancements to the Tax Compliance Status (TCS) process, which are to be implemented with immediate effect. These changes impact taxpayers seeking to transfer funds out of South Africa and will significantly affect those taxpayers who have ceased tax residency in the country.

As a starting point, it is important to note that a person who is a South African resident for tax purposes is entitled to transfer up to R1 million abroad annually before they need pre-approval for any further transfers. A non-resident however, needs approval for any transfer that they do. This approval takes the form of a Tax Compliance Status Pin, issued by SARS.

Prior to these new enhancements, SARS had separate processes for an Emigration TCS Pin and for a Foreign Investment Allowance TCS Pin. The former would apply to a person who was transferring funds out of South Africa following the cessation of their South African tax residency. The latter would apply in all other cases involving the transfer of funds out of South Africa. The process has now been changed to create one process for all offshore transfers, and is known as the Approval for International Transfer (AIT).

So, what has changed in terms of the information required? Not unsurprisingly, SARS has increased the extent of information and documentation required. This is the perfect time for SARS to acquire valuable information regarding the taxpayer’s financial affairs that could later be used in a more extensive investigation of that taxpayer.

The first important question that is asked is whether the taxpayer is considered to be a resident or a non-resident for South African tax purposes. If non-resident is selected, SARS will require that a Notice of Non-Resident Tax Status (a non-resident confirmation letter) be provided. This is a long-winded process, and the taxpayer will probably need the help of a tax practitioner to navigate through it.

SARS then asks three more questions of the taxpayer:

  • Are they beneficiaries of a trust?
  • Do they have shareholding in any companies
  • Have they made any loans to a trust?

SARS also requires a taxpayer to disclose both their local as well as their foreign assets and liabilities to SARS. This asset and liability disclosure is very extensive in terms of the breakdown of such assets and liabilities, and is further complicated by the fact that the assets must be valued ‘at cost’.

An additional new requirement is the request of the taxpayer for the sources where any of the values arose from. The taxpayer must be extremely careful as to the source selected as this is also subject to SARS verification. SARS will also ask for supporting documentation to confirm the source. The taxpayer could get into a significant pickle if they make an incorrect declaration at this point.

The change in process is just another step on the road that SARS is following to ensure that the top tier of wealthy South Africans declare their worldwide income. Those wealthy taxpayers looking to transfer funds will come under the microscope and be subject to this additional compliance requirement. Tax planning is going to be more important, as is access to a tax practitioner who knows their way around international tax legislation. Taxpayers are urged to tread lightly and be careful not to make any missteps that SARS could pounce on. If you are looking to move money, we recommend you consult with a qualified and experienced tax practitioner like HRTorQue before you unwittingly place yourself in the SARS spotlight.

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