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The Role of SARS in International Fund Transfers from South Africa: Understanding AIT and Tax Compliance

The Role of SARS in International Fund Transfers from South Africa: Understanding AIT and Tax Compliance

March 25, 2024


Planning to transfer funds overseas? Whether you’re investing, sending gifts, or managing international business, understanding the role played by the South African Revenue Service (SARS) in this process is important. SARS is there to oversee all cross-border transactions, ensuring fair, legal practices and compliance with tax obligations. With this in mind, let’s take a closer look at the international money transfer process in South Africa, as well as the impact of your tax residency status.

Understanding the Foreign Exchange Allowances

South African residents are entitled to transfer funds abroad within specific exchange control limits. The most commonly-used allowance is the Single Discretionary Allowance (SDA) of R1 million per calendar year. This allows you to transfer funds without requiring formal approval from SARS. However, exceeding this limit or transferring for specific purposes necessitates an Approved International Transfer (AIT) application, using your Foreign Investment Allowance if you need to move more than R1 million, but less than R10 million offshore.

The AIT Process and SARS AIT PIN

For transfers exceeding the SDA or falling under specific categories, you’ll need to file an AIT application through the SARS eFiling platform, which will provide you with a SARS AIT PIN, if your application is successful and you are granted tax clearance. You will also need to use the AIT clearance process if you are a non-resident transferring money out of South Africa.

Supporting documents for AIT Approval

To ensure compliance and smooth processing, submit relevant supporting documents with your AIT application. These may include:

  • Tax Compliance Status (TCS) PIN: Verifies your tax compliance status.
  • Tax Residency Confirmation Letter: Clarifies your residency status for tax purposes.
  • Statement of Assets and Liabilities: Provides insight into your financial position.
  • Supporting documentation for the transfer purpose: Proof of property purchase, investment details, etc.

Read more: What supporting documents does SARS require with the Approval of International Transfers (AIT) application?

The impact of tax residency on your international fund transfer from South Africa

Your tax residency status significantly impacts international fund transfers. If you’re considered a South African tax resident, you’re liable for tax on your worldwide income, even if earned abroad. Non-residents only pay tax on income sourced within South Africa. Furthermore, only South African residents have the exchange control allowances available to them when transferring funds out of the country.

Before we dive into the nitty-gritty, let’s establish your tax residency status in South Africa. Are you considered a resident taxpayer? This determination impacts how your international funds are treated. Here’s a quick rundown:

  • Resident taxpayer: If you spend more than 183 days in South Africa within a 12-month period, or meet specific criteria outlined in the Income Tax Act, you’re classified as a resident. This means you’re taxed on your worldwide income, including funds transferred internationally.
  • Non-resident taxpayer: If you don’t meet the resident criteria, you’re considered a non-resident. You’re only taxed on income sourced from South Africa, and special rules apply to specific types of international transfers.

Read more: How are residents and non-residents taxed in South Africa?

Using your foreign exchange allowances

As a resident, you’re entitled to a Single Discretionary Allowance of R1 million per calendar year. This allows you to transfer funds abroad for investment purposes without needing SARS approval. Remember, this allowance applies to individuals, not businesses or trusts.

Read more: Transferring money out of South Africa – the Single Discretionary Allowance vs the Foreign Capital Allowance.

Approved International Transfer (AIT) and SARS AIT PIN:

For transfers exceeding the SDA, you’ll need an Approved International Transfer (AIT) from SARS. This is obtained through the SARS eFiling portal using your SARS AIT PIN. This unique PIN grants you access to the AIT application and other international tax-related services.

SARS implements a more rigorous verification process for transactions exceeding R11 million. To obtain a Letter of Compliance, applicants must go through SARS, and this process is contingent upon approval from the South African Reserve Bank (SARB).

What are the prerequisites?

When applying for the AIT PIN, you must specify your South African tax residency status. Non-resident taxpayers need to furnish the following details to SARS:

  • Confirmation of the cessation of South African tax residency, including the date of the transition. (Non-Resident Confirmation Letter from SARS)
  • A comprehensive Capital Gains Tax Calculation schedule, outlining any tax liabilities related to the deemed disposal of assets on the day before the termination of tax residency.

Separate applications for non-residency must be submitted for each family unit member.

Additionally, your AIT PIN application necessitates confirmation of the following:

  • Whether you are a beneficiary of any Trust(s).
  • Whether you hold a direct/indirect shareholding of 20% or more in any Legal Entity (Local or Foreign).
  • Whether you have existing loan(s) to a Trust (Local or Foreign).

FinGlobal: cross-border financial specialists for South Africans

Looking to simplify your cross-border transactions while maintaining tax and exchange control compliance? FinGlobal can assist! Whether you’re a tax resident or non-resident, we’ll help you every step of the way with obtaining tax clearance from SARS, and international money transfers from South Africa.

To put our convenient, reliable services to the test, leave your contact details below and we’ll be in touch to get the process started for you.

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