Updates made to the exchange control rules in 2021 by the South African Reserve Bank (SARB) have shifted the focus from formal emigration to tax emigration. Tax emigration brings the South African Revenue Service (SARS) into the picture, and you will need to show the tax authority that you have cut tax ties with South Africa and squared away your tax obligations in order to migrate your finances overseas. What does this mean if you have already relocated or you are still planning your big international move? What documents will you be required to submit to SARS to support your tax emigration from South Africa? Here’s the lowdown.
Tax Compliance Status
What is a tax compliance status?
Tax Compliance Status (TCS) is the digital system that has replaced the Tax Clearance Certificate system that SARS used. The new TCS system gives you the ability to get a TCS PIN to verify your tax compliance status in real time, – this is more accurate and reliable than the manual Tax Clearance Certificate system.
The Emigration Tax Compliance Status (TCS) PIN is a confirmation of your tax compliance. You can apply for a TCS Emigration PIN once you have successfully ceased your tax residency with SARS.
The SARS Non-Resident Tax Status Confirmation Letter is issued after you have successfully navigated the tax emigration process. SARS will then issue the letter to confirm your tax non-residency. This is an important piece of paperwork, as the TCS PIN for Emigration is only valid for one year from date of issue.
What do you need, to apply for a Tax Compliance Status in respect of emigration?
- The following documents must be submitted to SARS: Statement of assets and liabilities for the previous three tax years (SARS wants you to disclose all your investments, loan accounts and any pay-outs you’ve received from local and foreign companies or trusts.)
- Your completed Form MP336(b) – ‘Emigration: Application for foreign capital allowance’ signed and stamped by an authorised dealer (i.e., a local commercial bank in South Africa)This form is only relevant if stamped and signed by an authorised dealer on or before 28 February 2021 (i.e: you completed financial emigration before the cut off date.)
- Where the authorised dealer informed you not to complete the MP336(b), for applications before 1 March 2021, you will need to get a letter from them to detail the reason(s) why the MP336(b) was not completed.
- All applications dated 1 March 2021 onwards will be processed by SARS by confirming whether you have ceased to be a resident for tax purposes. This means that you will not need a Form MP 336(b) as part of the TCS application process if you’re still planning on leaving or you’ve relocated in the past year.
- Where the MP366(b) is no longer applicable, relevant proof that you have ceased to be a resident for tax purposes in South Africa, including the date on which you ceased to be a resident.
- Where you emigrated without formalising your emigration with SARB or you emigrated many years ago and you have no assets and liabilities remaining in South Africa, you must submit a nil statement of assets and liabilities for the previous three tax years.
- Documentation verifying that Power of Attorney has been granted where the TCS application is submitted on your behalf.
- The Capital Gains Tax calculation on the deemed disposal of your assets on the day before the taxpayer ceased to be a resident.
- This is necessary where amounts are included under listed and unlisted investments as well as for other assets, such as Kruger Coins.
- Where you are a member of a pension, provident or retirement annuity fund, you must note on a separate document for each fund:
- Name of fund
- Expected lump sum amount to be paid out
- Expected pay-out date
- Where you have a South African insurance policy, you must provide the following information on a separate document for each policy:
- Name of insurance company
- Address of insurance company
- Policy number
- Date on which policy benefits are expected
- Details on any expected future benefits from such policy.
- Where you, your spouse or minor children are beneficiary to a trust, it will be necessary to note on a separate document:
- Name of the trust
- Income tax reference number of the trust
- Name(s) of the trustee(s)
- Postal and business address of the trust
- Nature of income received from the trust and the annual total thereof
- Date on which you first received income from the trust
- Monthly or yearly amount received from the trust
- Where you, your spouse or minor children are shareholder(s) in a private company or member(s) of a close corporation, you must detail the following on a separate document:
- Name of private company/close corporation
- Income tax reference number of private company/close corporation
- Number of shares/percentage of interest
- Postal and business address of private company/close corporation
FinGlobal: tax emigration specialists for South Africans living abroad
Submitting such an application to SARS will automatically trigger an audit by SARS into your tax compliance. This means a SARS-appointed auditor may require you to produce further documentation in support of your application. Such an audit will focus on the source of the funds that you want to transfer from South Africa and may in certain cases trigger a lifestyle audit. FinGlobal can help you ensure that you are prepared to handle this, smoothing your financial transition and assisting you every step of the way.
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