An advance payment for imports is a prepayment method in which an importer makes payment for items to be imported in advance, prior to the shipment of goods. As a result, the importer benefits from the timely and accurate processing of his import transaction.
In the latter part of 2021 the South African Revenue Service(SARS), implemented an Advance Payment Notification (APN) project, in terms of Sections 59A and 120 of the Customs and Excise Act 91 of 1964, which obligates importers who make advance payments for imports to initially register with SARS and thereafter notify SARS via eFiling of their intention to apply to an Authorised Dealer (Bank) for foreign exchange to be paid in advance for goods to be imported.
The ’APN’ project is one of SARS Customs Modernisation Programmes which involves a collaboration between SARS, SA Reserve Bank and Authorised Dealers in Foreign Exchange, aimed at combatting illicit financial flows and customs valuation fraud which can be associated with advance foreign exchange payments where goods may or perhaps may not be physically imported. An Authorised Dealer in Foreign Exchange is a person authorised by the Financial Surveillance Department of the SA Reserve Bank to undertake transactions in Gold and Foreign Exchange.
An application to SARS for an Advance Payment Notification also makes it easier for taxpayers and traders to comply with their tax obligations and assists SARS to detect and make non-compliance more difficult.
Once registered with SARS, notifications will need to be made to SARS prior to each and every advance payment transaction and will result in the issue by SARS of an APN, applicable to each advance payment transaction in excess of R50 000.
A client needs to be registered with SARS on eFiling and similarly registered as an importer, before requests for APN’s can be entertained and issued. Once you have Registered with SARS and you need to obtain APN’s for Advance Import Payment transactions, log-in to eFiling and follow the prompts to the Advance Payment Notification option. Assuming that your Customs Client Number (CCN) is correct, any outstanding information, as called for is provided and eFiling efiling is able to correctly validate your information, the ‘system’ should issue the unique APN number immediately.
This new process will apply to a local importer or a company financing an import payment, where the transaction is regarded as an Advance Import Payment (AIP). AIP’s could also include certain payments under letter of credit, standby letters of credit, import foreign bills for collection or certain types of guarantees. Applications to SARS on eFiling for an APN will enable the immediate issue of a reference number, so there should be no delays in finalising the underlying foreign currency transaction.
The APN number is related to a specific payment for specific goods imported, so it is our understanding that this reference number needs to be incorporated into the related import custom’s clearance declaration.
Since the 3 December 2021, it has actually been mandatory for import clients to Register and apply to SARS for an APN via eFiling, in respect of each AIP exceeding R50 000 and on the basis that Balance of Payment (BOP) reporting category 101 was applicable to the underlying transaction. This is the SARB reporting category which defines an advance payment for imports. Although mandatory from a SARS perspective, an Authorised Dealer was not obligated to enforce this SARS legislation prior to assisting clients with their payments.
However, in terms of the next stage of the project to be implemented on 1 December 2023, it will be mandatory for importing clients to communicate the related APN number to the Bank handling their cross-border transaction, for each AIP exceeding R50 000. It should also be pertinently noted that from 1 December 2023 it will become a pre-requisite for the paying Authorised Dealer to record, validate and report the APN provided by the importer to both SARB and SARS, as at the time the payment is concluded. Whilst it is fair to say that the APN process will become entrenched in the Bank procedures applicable to advance payments for imports with effect from 1 December 2023, the Banks can offer an exceptional but temporary solution to this rule, via the issue of a Bank Generated APN Number, known as a BGA, to exceptionally facilitate the underlying transaction, However it will still be necessary for the importing client to notify SARS of the payment made, including the related BGA number and make application for a SARS generated APN number, via eFiling.
For the sake of clarity, the following exceptional circumstances are applicable to a Bank issuing a BGA.
1. Payment requests under the R50 000 threshold where no SARS APN is required, but
where the threshold is subsequently exceeded due to exchange rate fluctuations, by the
time the Bank processes the transaction.
2. Non-submission of a SARS generated APN by the importer due to SARS system
3. Non-Validation of a SARS generated APN by a Bank due to SARS system downtime.
4. Exceptional circumstances where clients do not provide a SARS generated APN due to
payments associated with Letter of Credit, guarantees, foreign bills for collection, etc.
APN’s are optional for AIP’s under R50 000, but if an APN is provided to the Bank then it will be reported by the Bank to SARB and SARS
APN’s are not required when the Balance of Payment (BOP) reporting category is represented as category 102 and the transaction is referenced to an Import Undertaking Dispensation which would have previously been the subject of application and approval from SA Reserve Bank. In brief, the Financial Surveillance Department would be prepared to consider motivated requests to grant a dispensation to certain companies from the requirement to submit supporting documentation to their Authorised Dealers for every foreign exchange transaction related to an import transaction, known as an Import Undertaking Dispensation.
APN’s are not required in respect of AIP’s into the common Monetary Area (CMA) being Eswatini, Lesotho and Namibia.
By way of this briefing, it will be evident that if you are an importer and are likely to make advance payments for imports, it is essential that you register with SARS on eFiling, to enable the issue of APN References for onward provision to your Bank, upon introduction of this administrative procedure on 1 December 2023.