AIT Process Links Non-Compliant Companies to Individuals

The AIT process provides SARS with the opportunity to scrutinize an individual’s wealth to confirm their compliance status. However, SARS is now taking it one step further and considering an individual’s link to companies and trusts during the AIT approval process, and declining an application if the applicant is linked to a non-compliant entity.

Now, individuals need to tread extremely carefully when remitting funds out of the country and are linked to companies and trusts in any way. 

The Chain of Non-Compliance

Before the introduction of the new AIT process, South African tax residents would have made use of the Foreign Investment Allowance (FIA) TCS Pin. The FIA Pin was not intricate or complex and had a cap of R10 million over and above one’s single discretionary allowance (SDA) of R1 million.

While the AIT process has no limit to the amount of funds one can remit over one’s SDA, it is complex and requires a host of documentation and in-depth disclosures of an applicant’s assets and liabilities, at cost and market value. Where one incorrect disclosure is made, an applicant is labelled as “non-compliant”, halting the process in its tracks.

However, one aspect of the AIT process that many may overlook is the section regarding an applicant’s trust beneficiary status and any shareholding they may have in companies.

It is these seemingly inconspicuous questions that connect an individual to a company or trust and allow SARS the opportunity to add a link to the chain of non-compliance.

Company Non-Compliance

Companies and individuals often must follow the same rules when it comes to maintaining their compliance with SARS. For example, they too must submit an income tax return when the tax filing season commences.

However, in line with the FATF’s recommendations, SARS has amended the income tax return form for companies (ITR14). It now requires companies to complete a Shares Register, detailing the classes of shares, and the full disclosure of the holders of these shares, per class.

For a company to be compliant, this Shares Register needs to match the Beneficial Ownership Register companies must now complete for the Companies and Intellectual Property Commission (CIPC). Failure to do so will result in a non-compliance status and subsequent consequences, including hefty fines.

At the individual level, it does mean that where you are linked to a non-compliant company or trust, SARS will not approve your AIT.

Further, SARS now has the ability to cross-check any links an individual may have with a company or trust, and vice versa – so if you do not disclose your ties, SARS will uncover them and find you non-compliant. 

It is imperative to note that any form of non-compliance, regardless of scale or reason, will halt the AIT process in its tracks, leaving you with the unfortunate reality of funds stuck in SA.

Fixing the Problem

Due to the increased level of scrutiny, individuals may find themselves facing a declined AIT as a direct result of their link with a non-compliant company or trust.

To avoid this, it is always best to have a well-planned roadmap, which includes steps to identify and rectify non-compliance and to start the process of moving your funds abroad. A well-planned, all-encompassing compliance diagnostic roadmap requires the assistance of a multi-disciplinary team that understands the intricacies of the AIT process and how to best navigate communication channels with SARS.