The Approval for International Transfer, or AIT, is a protocol introduced by SARS earlier in 2023 aimed at ensuring compliance with SARB requirements relevant to the cross-border flow of money and facilitated via their eFiling platform.
When the SARB handed over the reins to SARS in managing financial transactions to and from South Africa a few years ago they made it patently clear that the aim of scrapping exchange control regulations was to ease over-regulation which hampered transacting and international operations. And yet it seems that any celebrations around the relaxed rules were quite premature.
Capital flows management framework
As two distinct governmental agencies, the SARB and SARS had previously collaborated in vetting, testing, and regulating assets, transfers, and transactions for South Africans and foreigners alike - whether local or abroad. Expats who wished to encash the proceeds of retirement annuities could sever their tax duties to SA through the process of financial emigration. This has now been replaced with tax emigration for those who wish to wrap up their tax obligations towards SARS and new processes align with the SARB’s capital flows management framework.
As the SARB took a step back, South Africans had a momentary breather before SARS doubled down by imposing novel regulations and, when it comes to AIT, reframing regulations as protocols necessary for their automated vetting, filing, and payment systems - eFiling.
The extensive and - to an extent - incomprehensible deluge of cascading and nested criteria that constitute the novel tax compliance status (TCS) protocols of AIT are confounding and have many wondering if it’s just a new form of exchange control donning a different cloak.
Grouping taxpayers and non-taxpayers
TCS is a standard worldwide process, irrespective of the labeling - the aim is to verify tax compliance for individuals. Where TCS under SARS diverges from the norm is in protocol changes under their approval for international transfer. The new online system has bundled two distinct groups under the same TCS PIN:
- Individuals who have emigrated and want to cut ties with SARS
- Individuals who are taxpayers either residing in SA or abroad who want to transfer more than their R1-million single discretionary allowance abroad using their foreign capital allowance.
The re-categorisation and new grouping is befuddling for various reasons.
Firstly, South African emigrants who no longer wish to have any financial or tax ties with their former home can hardly be vetted by the same criteria as those who wish to maintain multi-jurisdictional financial flows and activities with South Africa as their home base.
Secondly, South Africans who wish to retain their tax status in SA - whether local or abroad - clearly have no intention of severing their ties with SARS. This holds even more true now, given the three-year rule requires that South African emigrants maintain their ‘non-resident for tax purposes’ status for a full three years before their status is affirmed retroactively.
Why is the AIT so controversial?
The controversy around AIT relates to three primary points:
- The complex and expansive nature of the process.
- The invasiveness of the ‘auditing’ mechanism.
- That each filing season will require users to submit three years’ worth of supporting documents (such as a statement of assets and liabilities) to obtain their TCS PIN.
While the process is taxing for all who need to complete it, it’s far more onerous for South Africans living or working abroad.
- For the extensive list of supporting documents SARS will, for the most part, only accept copies not older than 14 days before the date of filing. This will invariably see taxpayers scramble frantically to ensure all documentation from all providers, agencies or institutions reaches them in time.
- Families who emigrated together may be required to complete the process for each individual adult. While this will not always be a requirement, adult dependents or spouses may need to complete the process simply to confirm their ‘non-resident for tax purposes’ status.
- Although the new process has already been implemented, SARS only allows limited functionality with regards to querying or updating any information in their prepopulated forms - all other queries or changes will need to be made at a branch.
- Those individuals who need to make the aforementioned changes will likely not be able to manage the process in their own capacity, which will require that they grant power of attorney to an individual or practitioner to do this on their behalf.
While individuals have always been required to authorise tax practitioners to manage their tax affairs on their behalf - such authorisation wasn’t as formal as granting power of attorney, especially not for those with limited assets or liabilities. Although power of attorney is not as formidable as it’s often made out to be, some individuals may still find it unnerving to grant external parties the power to officiate their financial affairs.
Let Rand Rescue help you out
Given the intricacies and implications of the AIT it’s inevitable that many South Africans will struggle to manage the process on their own. It’s not that individuals are inept - it’s a matter of proximity and practicality. Understanding the various requirements and engaging with their various financial services providers, investment agencies, and insurers as well as the revenue service across borders is a tall task.
With years of experience in the business, Rand Rescue has helped thousands of South Africans manage their cross-border finances. Whether expatriating funds, foreign exchange, tax filing, policy tracing and surrender, inheritance services, or tax emigration.
If you need assistance with any of these services, contact us for a free consultation to discuss your options.
The information provided on this website is intended for general informational purposes only. It is not a substitute for professional advice, whether financial, legal, or otherwise. Before making any decisions or taking any actions based on the information provided on this site, we strongly recommend consulting with qualified professionals who can assess your specific circumstances and provide tailored guidance.