Over the past number of years, the importance of being tax compliant has become ever-more relevant.
Certain professions are making it a pre-requisite for membership to their regulatory organisations and more and more financial transactions are requiring a positive tax compliance status.
These requirements are also mirrored in the corporate world with access to suppliers and especially tenders requiring the applicant to have their tax affairs in order.
Requirements for tax compliance
To be tax compliant essentially requires that the taxpayer adheres to the following 3 obligations:
- The that taxpayer is correctly registered for all taxes that are applicable to them
- That all required returns have been submitted to SARS and
- That the taxpayer does not have any outstanding debt with SARS.
It is important to note that “all” returns are required to be submitted and not just “most” or the latest ones.
If a taxpayer has an outstanding debt but has entered into a repayment plan which has been accepted by SARS, the taxpayer will still be considered as being compliant.
Tax Compliance Certificate vs Tax Compliance Status
In the past SARS issued physical Tax Compliance Certificates (TCC) which, depending of the nature of the TCC, was valid for a certain period e.g. Good Standing was valid for 1 year, a TCC for a Tender was valid for 3 months etc.
SARS have upgraded their systems and no longer issue a physical TCC. In its place they introduced a Tax Compliance Status (TCS). Under this system SARS issue the taxpayer a PIN which the Taxpayer may share with anyone who requires the TCS of the Taxpayer.
Under this new system the person using the PIN will access the “live” status of the Taxpayer. This system avoids the scenario where a Taxpayer may have a TCC issued to them and they then do not submit returns or pay amounts due for the next year as their certificate issued is still valid.
Type of Tax Compliance Statuses
SARS offers the following 4 versions of tax compliance Statuses (TCS)
- Good standing
- Tender
- Foreign Investment Allowance (FIA) and
- Emigration
Good Standing
The TCS for Good Standing is the general status used for a variety of requirements and no further documentation is required to be submitted on application.
As mentioned above this TCS is the live status of the Taxpayer’s profile on SARS’ systems.
A taxpayer may access their eFiling profile with SARS and check on their TCS. Should they not be compliant the system will indicate the problem e.g. outstanding returns or an amount due.
Tender
The TCS for tenders is for companies having to comply with specific tender conditions. No additional information is required to be submitted to SARS as the PIN shared by the Taxpayer allows the company issuing the tender to access the live TCS of the Taxpayer.
Fixed Investment Allowance (FIA) TCS
When applying for TCS for a Foreign Investment Allowance the taxpayer has to submit additional documentation as follows:
- Relevant material that demonstrates the source of the capital to be invested.
- Statement of assets and liabilities for the previous three tax years (this should include disclosure of all investments, loan accounts and distributions from local and foreign companies, trusts, etc.)
- Applicable Power of Attorney where the TCS application is submitted by a person other than the taxpayer.
With regard to point 1 the following documents regarding the source of the capital to be invested are required to be submitted
- Loan:
Where the parent lends money to the child to invest offshore:
- Loan agreement; and
- Bank statement of parent, not older than 3 months.
The trust lends money to the trustee or beneficiary to invest offshore:
- Loan agreement;
- Bank statement of trustee or beneficiary, not older than 3 months;
- Latest Trust Financials;
- Three months bank statements of trust, not older than 3 months; or
- Trust’s latest share portfolio statement (not older than 3 months). This statement will also include the number of shares and current market value.
The company lends money to a director of the company to invest offshore:
- Loan agreement between the company and the director;
- Bank statement of the director, not older than 3 months; and
- Company’s latest annual financial statements.
- Donation:
If the donation is between spouses:
- A declaration (IT144); and
- Bank statement of donee, not older than 3 months
If the donation is not between spouses:
- A Declaration (IT144)
- Proof (Copy of the receipt) of donations tax paid; and
- Bank statement of donor and donee, not older than 3 months.
- Inheritance:
- Letter from the executor of the estate;
- A copy of the Liquidation & Distribution account; and
- Bank statement, not older than 3 months.
- Savings / Cash / Bank Account / Fixed Deposits:
- Bank statement, not older than 3 months; and
- Proof of source (i.e. where and how you obtained the money).
- Shares:
- Portfolio statement not older than 3 months. This statement will also include the number of shares and current market value.
- Sale of property:
- A copy of the transfer duty.
- Original letter of the Conveyancer to confirm the transfer of the property and that the money will be transferred from the trust account; or
- Proof of receipt of the proceeds together with applicant’s bank statement not older than 3 months.
- Royalty Income:
- Source of royalty income; and
- Proof of royalty payment.
- Earnings:
- Where you have recurring foreign investments not exceeding R30 000 per annum a copy of a salary slip is needed once a year;
- The policy number; and
- It must be noted that the institution will apply on behalf of the taxpayer.
- Distributions from a trust:
- Resolutions from the Trust making the distributions;
- Details of the source from the Trust making the distribution;
- Bank statement of Trust, not older than 3 months; or
- Trust’s latest share portfolio statement (not older than 3 months); this statement will also include the number of shares and current market value.
- Other:
- Documentary proof and explanation.
Emigration TCS
When applying for a TCS in respect of emigration the following documents are required to be submitted:
Where the Taxpayer is for a first-time emigrant:
- Statement of assets and liabilities for the previous three tax years (this should include disclosure of all investments, loan accounts and distributions from local and foreign companies, trusts, etc.)
- A certified copy of the final application form ‘Request for settling in allowance” (MP336(b)) submitted to a foreign exchange dealer; or
- Where the authorised dealer (e.g. bank) informed you not to complete the MP336(b), the authorised dealer must provide a letter stating the reason(s) why the MP336(b) should not be completed.
- Applicable Power of Attorney where the TCS application is submitted by a person other than the taxpayer.
- Capital Gains Tax calculation on the deemed disposal of assets on the day before the taxpayer cease to be a resident.
- This is applicable where amounts are included under listed and unlisted investments as well as other assets (e.g. Kruger Coins).
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- Where the applicant is a member of a pension, provident or retirement annuity fund, the following particulars in respect of each fund must be submitted on a separate sheet:
- Name of fund;
- Expected lump sum amount to be paid out; and
- Date of expected payment.
- Where the applicant has a South African insurance policy, the following particulars in respect of each South African insurance policy the taxpayer own must be submitted on a separate sheet:
- Name of insurance company;
- Address of insurance company;
- Policy number;
- Date on which any benefits from the policy are expected; and
- Particulars of expected future benefits from such policy.
- Where the applicant, wife or minor children are beneficiary of a trust, the following particulars must be submitted on a separate sheet:
- Name of the trust;
- Income tax reference number of the trust;
- Name(s) of the trustee(s);
- Postal address of the trust;
- Business address of the trust;
- Nature of income received from the trust and the annual amount thereof;
- Date on which you first received income from the trust;
- Monthly or yearly amount received from the trust.
- Where the applicant, spouse or minor children are the shareholder(s) of a private company or member(s) of a close corporation, the following particulars must be submitted on a separate sheet:
- Name the private company/close corporation;
- Income tax reference number of private company/close corporation;
- Number of shares/percentage of interest;
- Postal address of private company/close corporation; and
- Business address of private company/close corporation.
- In case of a family unit, if the spouse wishes to be issued with a separate TCS in order to formalise his/her emigration, then the spouse must do the following:
- Complete a separate TCR01 – Tax Compliance Request form
- Submit a certified copy of the final application form ‘Request for settling in allowance MP336(b) submitted to a foreign exchange dealer (NOT a copy of the MP336(b) submitted by the husband/life partner); and
- Where the applicant is a member of a pension, provident or retirement annuity fund, the following particulars in respect of each fund must be submitted on a separate sheet:
- Submit the supporting documents in support of her application.
Note: The above will not apply where the family unit is emigrating together, and the details of the spouse are captured in the TCR01. In this event, the TCS for the applicant will include the details of the spouse (that is, names and tax reference number (if applicable)).