Tax Compliance Status and international transfers for a non-resident

South Africa has strict foreign exchange controls that allow the South African Reserve Bank to keep track of the outflow and inflow of capital in South Africa.

Taxpayers over the age of 18 who are South African residents are eligible for the following allowances:

R1 million single discretionary allowance (no tax clearance required from SARS)
R10 million foreign investment allowance (tax clearance required from SARS)

As of 1 April 2015, the foreign investment allowance increased from R4 million to R10 million per person per calendar year and R20 million per family unit. Taxpayers over the age of 18 who are South African residents are eligible for this allowance. It is mandatory to have a Tax Clearance Certificate that is valid for 12 months to take advantage of this allowance.

The R1 million single discretionary allowance may be used for any legal purpose abroad (including investment purposes). This can be used solely at the discretion of the resident without any documentary evidence having to be produced as to the purpose of the transfer. No tax clearance is required to make use of this allowance.

The R10 million foreign investment allowance may be invested into offshore investment portfolios, property, bank accounts, or other investments. You will require tax clearance to transfer these kinds of amounts of money.

The South African Revenue Service (SARS) introduced the Tax Compliance Status System in 2015 to replace the paper-based Tax Clearance System. Once you have applied for a Tax Compliance Status, you will receive a security PIN that enables you to authorise any third party (an organisation or government) to view your status online via eFiling. It will present your overall tax compliance status at the date and time of viewing it. To protect taxpayer confidentiality, no other info will be accessible to a third party.

Being tax compliant and ‘paying your fair share’ is not just good for you, but also contributes to the positive growth of our country’s economy which in turn benefits all South Africans.

SARS’enhanced TCS system was introduced on 24 April 2023 following consultations with authorised dealers and the SARB. It supports the strategic objectives of SARS to make it easier for taxpayers to comply. It also entrenches TCS verifications in Government, private sector, and individual taxpayer space, either voluntarily or via legislation. Whilst for compliant taxpayers this makes it easy, it will be harder for taxpayers who are unwilling to comply. The enhanced TCS system also aims to dramatically improve turnaround times for taxpayers and traders that are compliant.

When you apply for a Tax Compliance Status (TCS) in respect of foreign investment allowance for individuals, you are required to submit the following supporting documents:

Relevant material that demonstrates the source of the capital to be invested.
Statement of assets and liabilities for the previous three tax years (this should include disclosure of all investments, loan accounts, and distributions from local and foreign companies, trusts, etc.)
Applicable Power of Attorney where the TCS application is submitted by a person other than the taxpayer.
Non-Resident Applications
Relevant proof that the taxpayer has ceased to be a resident for tax purposes in South Africa, including the date on which the Taxpayer ceased to be a resident is required to be submitted.
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 Section 9(H)(2) of the Income Tax Act.
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 to be issued with a TCS Pin.

Note: In respect of the withdrawal of retirement funds (lump sum benefits from pension preservation, provident preservation, and retirement annuity funds) when South African Residents ceased to be residents for tax purposes in South Africa, payment of lump sum benefits to such individuals shall only be allowed if the individual member has remained non-tax active for at least three consecutive years.

In addition to the general supporting documentation listed above, the following specific documents that demonstrate the source(s) of the Total Value of International Transfer must be submitted and attached to the case:

Savings / Cash:

Bank statement issued on the date of the TCS application, reflecting the cash/ savings value.
Supporting documents that demonstrate and/ or prove where the cash/ savings originated from.
Should the taxpayer claim that the source of the funds to be invested is from an annual income/salary, then the administrator must review the past three year’s taxable income on the ITS system to ascertain the reasonableness of the statement.

Distributions from a trust:

Copy of Trust deed.
Resolutions from the Trust making the distributions.
Details of the source of funds distributed by the Trust.
Bank statement of the taxpayer issued on the date of the TCS application, reflecting the distribution from the Trust.
Bank statement of the Trust reflecting the distribution to the taxpayer, not older than a month.
Trust’s latest share portfolio statement (not older than a month). This statement will also include the number of shares and current market value.
Latest Trust Financials.

Donation:

A declaration of the donation (IT144).
Bank statement of the donor reflecting the donation paid, not older than a month.
Bank statement of the donee issued on the date of the TCS application, reflecting the donation received.
Proof (Copy of the receipt) of donations tax paid (not applicable to donations between (spouses).

Inheritance:

A copy of the Final Liquidation & Distribution Account stamped and signed by the Master of the High Court.
Bank statement issued on the date of the TCS application, reflecting the inheritance received.

Loans:

Between individuals:

The signed and complete loan agreement.
The Bank statement of the lender, showing the loan amount, not older than a month.
Details of the source of capital of the lender.
The Bank statement of the borrower issued on the date of the TCS application, showing the loan amount.


Between Trust and trustee or beneficiary:


The signed and complete loan agreement.
Bank statement of trustee or beneficiary issued on the date of the TCS application, showing the loan amount.
Latest Trust Financials.
Bank statement of Trust showing, the loan amount, not older than a month; or
Trust’s latest share portfolio statement (not older than a month). This statement will also include the number of shares and current market value.

Between company and director or employee:

The signed and complete loan agreement.
The Bank statement of the borrower issued on the date of the TCS application, showing the loan amount.
Company’s latest annual financial statements.

Sale of property:

Original letter of the Conveyancer to confirm the transfer of the property and that the money will be transferred from the trust account; or
Proof of receipt of the proceeds in the applicant’s bank statement not older than a month.
Where the property was jointly owned, the proceeds of the sale to be clearly split as per the source document.
Capital Gains Tax calculation on the sale of the property.

Sale of Shares and other securities:

Capital Gains Tax calculation on the disposal of the shares.
Portfolio statement reflecting the sale of shares, not older than a month. This statement will also include the number of shares and current market value.
Do not insist that the taxpayer transfer shares, investments, unit trusts, and fixed deposits over to a savings account.

Sale of Crypto Assets:

Trading account statement reflecting the trade of the crypto asset.
Bank statement, issued on the date of the TCS application, reflecting the amount available for transfer.

Transfer of Listed Securities:

Details of the locally listed securities that the Taxpayer will be transferring to an exchange that is outside South Africa.
Capital Gains Tax calculation on the transfer of the shares.
Investment income – Local and foreign:
Schedules of the interest/dividends received indicating the source and amount of interest/dividends.

Royalty Income:

Source of royalty income.
Proof of royalty payment.

Earnings:

Where a taxpayer has recurring foreign investments not exceeding R30 000 per annum a copy of a salary slip is needed once a year.
The policy number indicating that the institution (e.g. Sanlam / Old Mutual) will apply on behalf of the taxpayer.
Income from any entity, local or foreign, in which the taxpayer holds a direct or indirect beneficial interest.
The nature of the relationship with the entity.
Proof of amounts/distribution received from such entities.
For an owner of any business, the company group structure, profile, and other group investments.
If a director of a company or member of a Close Corporation is a shareholder, a shareholder’s agreement and share incentive scheme agreement.

Other:
Documentary proof and explanation.

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