With the State Capture Commission’s findings being trumped with varying shocking headlines every day, South African authorities are scrambling to curb money laundering, stop illegitimate capital being exported from SA, and ultimately get South Africa off the FATF’s grey list.
Al Jazeera’s exposé, Gold Mafia, recently laid bare the financial sector’s shortcomings in their efforts to assist anti-money laundering across borders, with greed and access to client information being key.
With new legislation promulgated specifically relating to domestic trusts, SARS has now joined the surveillance momentum by merging the respective Tax Compliance Status (“TCS”) PIN requests to only two categories, i.e. “Good Standing” and “Approval of International Transfer”. This results in an increased administrative burden on taxpayers wanting to legitimately transfer funds offshore with additional scrutiny being applied by SARS to verify the submitted information before they could issue the required PIN.
Whether you want to utilise your annual Foreign Investment Allowance (“FIA”) of R10 million as a tax resident or obtain clearance to export capital under the previously “Emigration” category, South African taxpayers, tax resident or not, now need to comply with vigorous requirements in both instances under the “Approval of International Transfer” category. This includes confirming, inter alia, the source of each asset held backed up by source documents with confirmation of the base cost and current market value of each of the said assets.
Taking cash in bank as an example: The source of funds reflected in a bank account should be disclosed, e.g. salary, interest, etc., backed up by the relevant source documents. This could range from salary slips to IT3(b)’s verifying interest and dividends received over time. In addition, bank statements submitted to SARS should be dated on the same day of submitting the PIN request to SARS.
This is yet another method applied by SARS to monitor source of funds in an environment where ambiguous transactions are prevalent in an umbrella effort with the SARB and other authorities.
We propose the following to assist in being tax compliant when applying for a “Approval of International Transfer” TCS PIN:
- Being up to date with tax returns and payments to SARS (unless payment arrangements or a suspension of payment is agreed to);
- Getting your source document administration up to date to ensure source of funds and capital assets can be proved;
- Keeping a meticulous statement of assets including base cost, market value and whether or not source documents are available or not, and updating this statement on a regular/annual basis;
- Obtaining an affidavit deposing of exact facts in the event that a source document proving source of funds is unavailable.
These pointers are not the requirements per se, but would assist in complying with a request when applying for a “Approval of International Transfer” TCS PIN.
We anticipate a few consequences, albeit not exhaustive, as a result of the increased administrative burden on both taxpayers and SARS:
- Taxpayers not being able to back up source of funds or other required documentation due to a lack in record-keeping over time, rendering a TCS PIN request futile with capital being stuck in SA;
- Delays in issuing a TCS PIN to taxpayers due to increased information to be verified and the volumes of PIN requests;
- Increased administrative non-compliance and / or understatement penalties being levied by SARS based on information submitted, resulting in an increase in tax disputes;
- More voluntary disclosure applications being submitted as a result of taxpayers reviewing their tax affairs prior to requesting a TCS PIN.
In a world where a problem child or three in the classroom are running havoc, the rest are treated the same and have to now increase their own compliance benchmark without the reprise of knowing that the culprits will be brought to book. That being said, you don’t want be the one waiting in the corridor in front of the headmaster’s office – he is after all looking for someone to make an example of and will eventually find one.
Should you have queries relating to this article, please contact Suzanne Smit at suzanne@fidelisvox.co.za for further assistance.
This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)