Authors: Lavina Daya and Scott Salusbury. In October 2015, the Organisation for Economic Cooperation and Development (“OECD”) published its final reports on the Base Erosion and Profit Shifting (“BEPS”) project, including the final report on BEPS Action 13, Transfer Pricing and Country-by-Country Reporting (“Action 13 Report”). The Action 13 Report recommended a three-tiered approach to transfer pricing documentation, requiring a global master file and local file to be submitted by multinational enterprises (“MNEs”) to local tax authorities and a country-by-country (“CbC”) report to be submitted by the “ultimate parent entity” of an MNE in the jurisdiction in which it is tax resident. The CbC report will contain information to provide the tax authorities with an overview of the global allocation of income, business activities and taxes paid within the MNE. The tax authorities of various jurisdictions will share CbC reports through automatic exchange of information mechanisms, such as the Multilateral Competent Read More …
Author: Nyasha Musviba
Africa tax in brief
Author: Celia Becker. ANGOLA: Securities Code Regulations enacted The Securities Code Regulation (Regulation No. 6/16) (the “Regulation“) was approved by the Council of Administration of the Capital Market Commission and gazetted on 7 June 2016. The Regulation contains the organisation rules and administrative requirements for open companies and other issuers of securities admitted to trading in regulated markets. CAMEROON: Tax amnesty on property tax announced On 21 June 2016, Cameroon’s National Treasury published a notice on its website introducing tax amnesty on property tax. According to the notice, provided that payments of property tax are made before 31 December 2016, no penalties will be levied.
Venture capital companies – summary of the latest tax rulings
Author: Mansoor Parker and Anuschka Wischnewski (ENSafrica). Introduction The venture capital company (“VCC”) regime was introduced in 2009, with an aim to encourage investors, by way of substantial tax benefits, to invest in small South African trading companies. VCCs are private investment companies, although they need not be, as the Income Tax Act does not prevent VCCs from listing their shares on the Johannesburg Stock Exchange. The past two years have seen a phenomenal increase in the number of VCCs. There are now 36 South African Revenue Service (“SARS”) approved VCCs, of which 29 were approved in the past two years.
Taxation Laws Amendment Bill released for comment
Authors: Bernard du Plessis and Peter Dachs (ENSafrica). The Taxation Laws Amendment Bill 2016 has been released for public comment. It introduces various interesting amendments to South Africa’s tax law, which include the following: Use of trusts In circumstances where an interest-free loan has been advanced to a trust by a connected person (which includes a beneficiary or a relative of a beneficiary), it is proposed that a market-related rate of interest (currently 8%) is deemed to be paid on that loan. This deemed interest will not be tax deductible in the hands of the trust but will be taxable in the hands of the lender and will not qualify for an interest exemption.
Transfer pricing – Consequence of year end adjustments
As all multinational groups of companies should be aware transfer pricing is a significant tax issue when operating cross border in multiple tax jurisdictions. Transfer pricing legislation exists in most established tax regimes and is becoming more and more prevalent in countries previously considered less tax sophisticated. In the context of South Africa, transfer pricing legislation has been present in the Income Tax Act, 1962 (the Act) for a number of years and was significantly revised in 2012 to better align with the Transfer Pricing Guidelines issued by The Organisation for Economic Cooperation and Development (OECD).
Transfer pricing – Arm’s length principle
Using South Africa as our departure point, section 31 of the Income Tax Act, 1962 (the Act) provides that the tax payable in respect of international transactions is to be based on the arm’s length principle. In brief, section 31 of the Act provides that: where any transaction, operation, scheme, agreement or understanding (hereinafter, transaction) which constitutes an ‘affected transaction’ has been concluded between connected persons;
Tax administration – Prescription
From time to time, our courts are called upon to remind public officials that compliance with the requirements of provisions in legislation is necessary to enable them to enforce the powers entrusted to them. The requirements are in place to enable the public to understand the reasons for the administrative action and to determine whether the action is compliant with the law.
Crowdfunding and tax – two’s company, three’s a crowd
Authors: Michael Reifarth and Yani van der Merwe (ENSafrica). There has been a rapid expansion of the crowdfunding industry during the last couple of years where businesses and entrepreneurs use crowdfunding platforms to promote their business ideas and to obtain funding from the public to finance their ventures. Although there are advantages and disadvantages to a crowdfunding arrangement in comparison to traditional funding arrangements, one constant factor applicable to both alternatives is that the transactions between the recipient and the provider of funding will, at all times, be subject to the provisions of the Income Tax Act, No. 58 of 1962 (the “Act”). In this article, we briefly consider some of the possible South African tax implications that may arise pursuant to the utilisation of the various types of crowdfunding that have lately been gaining traction in South Africa.
OECD Request for Input on the development of a multilateral instrument to implement tax treaty BEPS measures
Author: Elsabe Strydom (ENSafrica). The Organisation for Economic Co-operation and Development (“OECD”)/G20 Base Erosion and Profit Shifting (“BEPS”) Project identified 15 actions based on the following three key themes, being: the introduction of coherence in the domestic rules that affect cross-border activities; the reinforcement of substance requirements in the existing international standards; and the improvement of transparency and certainty. In particular, the final BEPS package, released on 5 October 2015, represents a substantial overhaul of the international tax rules and once the measures become applicable, it is expected that profits will need to be reported where the economic activities that generate them are carried out and where value is created.
The VAT implications of interest-free credit
It is the long-standing practice of traders and service providers to grant customers extended payment terms for the goods or services they supply as a means to enhance turnover. Where the credit provided is interest-free, the question that arises is whether the provision of such credit impacts on the entitlement of the supplier to claim input tax for value added tax (“VAT”) purposes.