Enhancements to the SARS Tax Clearance System

SARS modernisation journey: Enhancements to the Tax Clearance System to obtain approval to move funds out of South Africa 

The enhanced Tax Clearance System (“TCS”) was introduced on 21 April 2023. The South African Revenue Service (“SARS”) announced changes to its tax compliance processes, with effect from 24 April 2023.

In the past, Foreign Investment Allowance (FIA) and Emigration TCS applications were separate, timeous applications, which were required to be submitted for different purposes. However, SARS heard the plights of the practitioners, tax regulatory bodies as well as the taxpayers.

This enhancement, according to SARS, forms part of their modernisation journey and aligns with the strategy of voluntary compliance. The process has been implemented to further strengthen the legislative alignment with the South African Reserve Bank (“SARB”) exchange control changes as it pertains to emigration. The new dynamic application, now called Approval International Transfer (“AIT”), replaces the existing ‘Emigration’ and ‘Foreign Investment Allowance (FIA)’ application types. The Tax Compliance Request form (TCR01) has been amended to align and consolidate the required changes, into a single application, that simplifies the process for those who want to remain compliant but makes it difficult for those who are unwilling and non-compliant.

Key points to note when using the new TCS System:

• The new TCR01 form has changed from the previous look to a more sophisticated form. 
• An additional section within the TCR01 form allows for the capturing of Assets and Liabilities (Local & Foreign). 
• In addition to the supporting information historically required, SARS may request further supporting documentation on the AIT application. 
• For a non-resident making an application to externalise funds, supporting documents will include proof that the taxpayer ceased to be a resident for tax purposes, including details of Capital Gains Tax workings when ceasing to be a resident. Non-residents should also ensure that their tax residency status on the RAV01 declaration form is correct.
• For a full list of SARS requirements related to supporting documents, visit the following link: Supporting Documents for Approval of International Transfers (AIT) | South African Revenue Service (sars.gov.za)
• No TCS is required for transfers up to R1 million per calendar year. 
• SARS has also removed the tender option and the Good Standing TCS will be applicable for all third-party tax compliance verification.

The new TCS system aims to dramatically improve turnaround times for traders and taxpayers who are compliant. It is clear that SARS is enhancing their systems to better ensure, or enforce, tax compliance.

If you are planning to obtain approval to externalise funds, whether as a resident or non-resident for tax purposes, contact one of our tax consultants and we would be able to guide you through the more technical aspects of your application.