Global Tax Alert | 10 February 2014

South Africa introduces new tax clearance certificate application process

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The South African Revenue Services (SARS) recently introduced an enhanced Tax Clearance Certificate (TCC) application process for both South African (SA) resident companies and branches. It is important to note that the policy governing the issue of TCC's, as well as the laws governing this process, will not change.

The new TCC process will require that all companies within a group of companies are tax compliant. This means that the tax compliance of sub-entities, divisions or branches of a corporate will have an impact on the holding company's tax compliance status, meaning if any one of the sub-entities is non-complaint, the holding company will also be regarded as non-compliant and a TCC will not be issued. The SARS will add all sub-entities belonging to the holding company and provide a consolidated group compliance certificate.

When filing for a TCC, the company needs to use the holding company's (legal entity's) income tax reference number. Ideally it should also use the requesting entity's Value Added Tax (VAT) and Employee's Tax (PAYE) reference numbers. For Branches, the VAT, PAYE, UIF & SDL reference numbers of the branch must be used when applying for TCC.

One of the anticipated improvements of the new system is that of “real-time” processing, with the application outcome reflecting immediately in the form of a “pin.” The pin will attach to one of three indicators as follows:

  • Green indicator – implies that the taxpayer has compiled with all necessary requirements and the TCC request has been approved;
  • Red indicator – implies non-compliance and that the TCC request has been rejected;
  • Blue indicator – implies that there is no history available for the taxpayer (this would typically occur for newly registered taxpayers who do not have any known default according to SARS' system and will receive both a “green” status indicator and a “blue” status indicator).

Another significant difference with the new TCC system is that it will do away with “blanket” TCC's that are valid for a fixed period of time (usually one year). Taxpayers will now be required to specify the purpose of the TCC application, detailing for instance the tender number, tender value (the values that the taxpayer is proposing and not the advertised value) and the duration of the tender. The pin provided on application will thus only be valid for that particular project being tendered for and for the period that has been specified. In the event that the taxpayer requires an amendment to the period to which the TCC applies, the taxpayer will have to apply to SARS to extend the period.

For additional information with respect to this Alert, please contact the following:

Ernst & Young Advisory Services Ltd, Bloemfontein, South Africa
  • Emile Du Toit
    +27 51 406 3516
Ernst & Young Advisory Services Ltd, Johannesburg, South Africa
  • Gugulethu Lushaba
    +27 31 576 8151
Ernst & Young (China) Advisory Services Limited, Pan African Tax Desk, Beijing
  • Rendani Neluvhalani
    +86 10 5815 2831
Ernst & Young LLP, Pan African Tax Desk, New York
  • Dele Olaogun
    +1 212 773 2546
Ernst & Young LLP (United Kingdom), Pan African Tax Desk, London
  • Leon Steenkamp
    +44 20 7951 1976

EYG no. CM4168