Background
On 1 December 2023, the South African Revenue Service (hereafter referred to as “SARS”) will implement a new advance payment notification requirement. The Advance Import Payment (AIP) Notification as part of the Advance Payment Notification (APN) project is one of the SARS Customs Modernisation Programmes which involves a collaboration between SARS, the South African Reserve Bank (SARB) and authorised dealers in foreign exchange (mostly Banks) and is aimed at combatting illicit financial flows and customs valuation fraud associated with the misuse of advance foreign exchange payments in respect of goods that are to be imported.
An APN is an application made by an Importer to give notice of the intention to make an advanced payment in excess of R50 000 to a supplier of imported goods. It is submitted via SARS efiling.
The South African Reserve Bank (SARB) authorises dealers in currency and foreign exchange to make advance foreign exchange payments to foreign suppliers thereby securing the supply of goods and enabling the subsequent importation thereof into South Africa. When applying for foreign exchange payments clients will be requested to submit supporting documents for example a pro-forma invoice from the foreign supplier detailing the intended supply of goods to you, their client. We will also need a bank generated APN which we need to provide to SARS along with the proforma invoice.
The SARB has published under Section 9 of the Currency and Exchanges Act No. 9 of 1933 an exchange control regulation, making provision for Advance Import Payments.
What is the purpose of the APN?
Advance payment notifications make it easy for taxpayers and traders to comply with their tax obligations whilst assisting SARS to detect and make non-compliance hard and costly for those traders and taxpayers who do not comply. The APN process ensures that traders notify SARS of their intention to apply to an authorised dealer for an advance foreign exchange payment for imported goods. This further prevents underpayment of customs duties and taxes, valuation fraud and illicit financial flows related to the importation or non-importation of goods following advance foreign exchange payments.
What are the obligations of importers in respect of APN?
With effect from the 3rd of December 2021, in terms of the published Rules under sections 59A and 120 of the Customs and Excise Act 91 of 1964 for Advance foreign exchange payments, importers had an obligation to notify SARS via eFiling of their intention to apply to an authorised dealer for an advance foreign exchange payment in respect of goods to be imported. This was Phase 1A.
All import clients had to apply for an APN through their eFiling profile for each AIP exceeding R50 000 and if the Exchange Control (hereafter referred to as “EXCON”) Balance of Payment (hereafter referred to as “BoP”) category code is 101. Previously, Authorised Dealers (hereafter referred to as “AD”) were not obligated to enforce the SARS legislation before assisting clients.
- AIPs could include an advance foreign exchange payment related to cross-border transactions, import letters of credit, standby letters of credit, import foreign bills for collection or certain types of guarantees.
- The APN application notifies SARS of a client’s intention to apply to an AD facilitating the international payment.
Phase 1B comes into effect on 1 December 2023.
- It will be mandatory for all import clients to communicate the related APN number to the Various Banking Institution they bank with for each AIP exceeding R50 000 and if the EXCON Balance of Payment (BoP) category code is 101.
- It will be mandatory for the paying AD to record, validate and report the APN provided by the importer to the SARB and SARS (when the payment is concluded).
APNs are optional for AIPs under R50 000. If APNs are provided, they will be reported by an AD to SARB and SARS.
When are APNs are not required?
- When AIPs under EXCON Balance of Payment (BoP) code 102 is used against an import undertaking dispensation (granted by the SARB to certain import clients)
- For AIPs into the Common Monetary Area (Eswatini, Lesotho and Namibia)
Observation
As much as SARS new APN requirements might feel like a headache, they’re an important new development. However, many Importers already frantically trying to meet orders and deadlines will feel the changes are yet another complication in an already complex space.
In order for us to submit an APN to SARS we require a proforma invoice, and a Bank generated APN. Please let us know if we need to register your company for this service.
For almost all Importers their primary concern is growing their business. Anything that distracts from that isn’t going to be met with enthusiasm. Let us attend to your APN SARS requirements while you continue to focus on growing your business.
By Laverne Geswint
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