In terms of the South African Income Tax Act, 1962 (the Act),transfer pricing adjustments are made in circumstances where multinational entities transact at prices that do not reflect prices expected to be charged if parties to the transaction were independent persons dealing at arms length. Base Erosion and Profit Shifting (BEPS) refers to tax planning strategies that shift profits from high tax jurisdictions like South Africa to locations where little or no corporate tax is being paid.
Author: Roxanna Nyiri, Director, BDO Tax. Insurance in todays world is no longer limited to a single country and has over the last few decades seen interesting global developments. Reinsurance and cell captive insurance have become an integral part of enterprise risk management. Reinsurance and cell captive insurance not only provide business with tools to manage their risk, limit their cost of insurance, but also to hedge against currency fluctuations. These developments, of course, also have their own unique tax consequences, especially where they span jurisdictional borders. With the advent of the Organisation of Economic Cooperation and Developments (OECDs) Base Erosion and Profit Shifting (BEPS) initiatives, tax authorities across the globe are scrutinising insurance structures from a tax perspective, especially with regard to transfer pricing. This increased scrutiny often leads to the cross border pricing related to intercompany insurance related transactions being challenged.
Author: Roxanna Nyiri, National Head of Transfer Pricing and International Tax and Director BDO Johannesburg. The OECDs base erosion and profit shifting (BEPS) has been at the forefront of international tax discussions over the last number of years. Multinationals are concerned with how they will be affected and how tax authorities will be applying BEPS regulations.
Author: Roxanna Nyiri, Director: Transfer Pricing at BDO Tax Services. The ramping-up of country-by-country (CbC) reporting to regulate transfer pricing and combat cross-border tax evasion, heralds a new global tax landscape. It makes for different demands by tax authorities worldwide and requires the provision of information at a much finer level of detail. As a result, the risks associated with transfer pricing rises significantly and companies need to strategically manage this new policy environment, especially given that the first CbC reports are required to be filed with SARS from 31 December 2017.
Author: Scott Salusbury. On 2 June 2017, the South African Revenue Service (SARS) published a draft public notice requiring the submission of country-by-country (CbC), master file and local file returns. This marks an important step towards the finalisation of South Africas transfer pricing documentation requirements. As a result of the work on the base erosion and profit shifting (BEPS) project, the Organization for Economic Cooperation and Developments Transfer Pricing Guidelines for Multinational Enterprises and Tax Authorities now include recommendations for a three-tiered approach to transfer pricing documentation (ie CbC report, master file and local file), which South Africa is in the process of implementing.
Author: Lavina Daya. One of the main action items identified by South Africas National Treasury in its summary of the countrys position on the G20/Organisation for Economic Co-operation and Development (OECD) action plan on base erosion and profit shifting (BEPS), is the requirement for the South African Revenue Service (SARS) to update the Transfer Pricing Practice Note in line with the OECD Transfer Pricing Guidelines to include new guidance on the arms length principle and an agreed approach to ensure appropriate pricing on intangibles that are difficult to value.
Author: Elsabe Strydom and Richard Wilkinson 9tax Associates at ENSafrica). Now that the final regulations relating to country-by-country reporting standards (the CbC Regulations) have been published by the South African Minister of Finance on 23 December 2016, it is important to take stock and consider the CbC Regulations in the context of various other South African developments regarding the implementation of the recommendations contained in the final Action 13 report issued by the Organisation for Economic Cooperation and Development (OECD) on transfer pricing documentation. Accordingly, we have summarised below the current status of the master file/local file returns that also form part of the OECDs Action 13 report, the Final Notice on Transfer Pricing Record Keeping Requirements, issued by the South African Revenue Service (SARS), as well as the transfer pricing disclosure requirements in the corporate income tax return (ITR14).
The European migrant crisis has reached catastrophic proportions. In 2015 more than a million migrants and refugees from Syria, Afghanistan, Iraq and other Asian and African countries fled from war and conflict, to Europe. The European Union (EU) is struggling to cope with the influx, which has caused schisms in the EU over how best to deal with resettlement of these displaced persons. Some European jurisdictions have been willing to accept asylum seekers while others have responded by increasing funding for border patrol operations in the Mediterranean and re-introducing border controls within the Schengen Area.
In October 2015, the OECD BEPS Action 4 Report on Limiting Base Erosion Involving Interest Deductions and Other Financial Payments (Report) was released setting out a common approach to address BEPS involving interest and payments economically equivalent to interest. The Report included a ‘fixed ratio rule’ which limits an entity’s net interest deductions to a set percentage of its tax earnings before interest, taxes, depreciation and amortisation (tax EBITDA) and a ‘group ratio rule’ which permits an entity to claim higher net interest deductions, based on the financial ratio of its worldwide group.
On 22 August 2016 the OECD released Public Discussion Draft: BEPS Action 2 – Branch Mismatch Structures (Discussion Draft), which identifies and analyses mismatches that may arise through the use of branch structures. The Discussion Draft sets out preliminary recommendations for domestic rules, based on those proposed in the OECD’s Final Report on BEPS Action 2 – Neutralising the Effects of Hybrid Mismatch Arrangements (2015 Final Hybrids Report), which will hopefully neutralise the mismatches in tax outcomes arising from the exploitation of branch structures. To contextualise the Discussion Draft, it is necessary to summarise briefly the BEPS risks that BEPS Action 2 seeks to address.