What was once a paper-based, manual tax clearance certification system has been replaced by a digital system that verifies a taxpayer’s tax compliance status in real time. Here’s what you need to know about the different types of tax compliance with the South African Revenue Service (SARS) and how they apply to you.
Why is tax compliance important if you’re a South African living overseas?
Tax residents temporarily abroad are required to file a tax return with SARS – no matter where in the world they reside – in order to declare their earnings and pay tax on their foreign employment income where it exceeds R1.25 million per annum.
South Africans who have ceased tax residency by failing to meet the requirements of the physical presence test (staying outside of South African borders for a stretch of 183 days) need to make their non-resident status official with the tax authority by completing the process of tax emigration and settling their exit tax bill.
What is the Tax Compliance Status (TCS) PIN from SARS?
This is a unique PIN that is generated by SARS to provide a way for taxpayers to enable any third party to view and verify their tax compliance status online via eFiling. Once issued, this code provides the third party with the means to view your current tax compliance status online.
- It provides your general tax compliance status on the date and time that the third party verifies your status, and not as at the date the PIN was first issued.
- No other information is accessible to any third party using this TCS PIN, it is purely a means to verify your compliance status.
There are three different types of tax compliance that apply primarily to individuals. (The fourth being TCS for the purposes of applying for tenders is more relevant to businesses.)
TCS – EMIGRATION PIN: Tax Compliance Status – Emigration PIN
This PIN is the verification that an individual receives once they have successfully completed the process to cease tax residency with SARS.
- Through this process, individuals declare their remaining South African assets and submit to the exit tax procedure in order to become a tax non-resident.
- In other words, before you can apply for a TCS – Emigration PIN you must have completed the Cease to be a Resident
- A TCS – Emigration PIN was also issued to residents who have formally emigrated from South Africa before 1 March 2021.
TCS – FIA PIN: Tax Compliance Status – Foreign Investment Allowance PIN
This TCS PIN will be issued by SARS to a taxpayer to authorise the investment/transfer of funds outside of South Africa. Applications to utilise the Foreign Investment Allowance may only be made by individuals who are 18 years and older. Since exchange control system updates and rule changes in March 2021, emigrants and residents are treated the same when transferring funds out of South Africa.
- They are allowed to send up to R1 million per calendar year offshore by means of the discretionary allowance, without a TCS PIN. Emigrants are however only allowed to avail of the allowance in the year that they cease tax residency.
- Up to R10 million per year is permissible per calendar year per emigrant who ceases to be a resident for tax purposes and is 18 years and older, provided that the individual is tax compliant and submits the applicable TCS PIN for verification.
Here’s what you need to know about using your Foreign Investment Allowance
- Where an individual wishes to transfer more than R10 million abroad, this will trigger a more rigorous SARS verification process, and will need to be approved thereafter by the Financial Surveillance Department of the South African Reserve Bank.
- Large transfers will be subject to a risk management test that examines, among other things, the verification of the tax status of the individual and the source of funds, as well a risk assessment that will be conducted against the individual in terms of the anti-money laundering and countering terror financing requirements.
- Such an application to the Financial Surveillance Department will need to have an accompanying TCS PIN letter that reflects the individual tax number and TCS PIN to verify their tax compliance status.
- The application for this TCS PIN must be submitted using eFiling, along with the necessary supporting documentation required by SARS. This documentation includes (among other things) –
- Verification of the source of the capital that the individual wishes to move offshore.
- A Statement of Assets and Liabilities from this individual that covers the previous three tax years.
- A letter transferring Power of Attorney if the TCS application is being submitted by someone other than the individual taxpayer.
- Taxpayers who have already emigrated and now wish to transfer their ‘Emigrant’s Remaining Assets’ (formerly Blocked Funds) must request a TCS for FIA via eFiling. Such transfers are treated in line with any other foreign capital transfer and the taxpayer must select the applicable ‘Source of capital to be invested’, bearing in mind that the option for ‘Emigrant’s Remaining Assets’ is no longer available on eFiling.
TCS – GOOD STANDING PIN: Tax Compliance Status PIN – Good Standing (income transfers)
This compliance status PIN is required on an annual basis from persons who have ceased their tax residency in South Africa and wish to transfer current income earned abroad.
How/where do you request your Tax Compliance Status?
You can now request your Tax Compliance Status here. Or you can submit a request to receive a Tax Compliance Status (TCS) that meets a specific purpose (such as for the purposes of applying for a government tender) online via the eFiling portal.
How to request your Tax Compliance Status via eFiling
Once you have viewed your “My Compliance Profile”, you may request a Tax Compliance Status PIN by choosing the Tax Compliance Status Request option and the type of TCS that you need. As discussed above, you have the following options:
- Good standing
Complete the Tax Compliance Status Request fields and press ‘SUBMIT’ to send it to SARS. Each request will generate a unique PIN.
FinGlobal: tax specialists for South Africans abroad
Unsure of your tax compliance status with SARS? It’s important to get square with SARS if you’re a South African living abroad. Wondering how to fix non-compliant tax status? FinGlobal can help with tax clearance, tax refunds, and more. Leave your contact details below and we’ll be in touch soon to discuss your tax situation.