MIRROR MIRROR ON THE WALL WHO HAS THE FAIREST TAX RATE OF THEM ALL?

Author: Roxanna Nyiri, National Head of Transfer Pricing and International Tax and Director BDO and Jolani Proxenos, International Tax & Transfer Pricing Consultant at BDO.   Developing countries (or capital-importing countries) are making strong efforts to attract foreign investments. South Africa and Mauritius are seen as developing countries and have adopted tax incentive regimes to increase their attractiveness for Multinationals to set-up locally.

SARS publishes draft notice to submit country-by-country, master file and local file returns

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.

New Public Notice published in respect of mandatory documentation required for transfer pricing transactions

Section 29(1)(b) of the Tax Administration Act, No 28 of 2011 (TAA) provides that a person must keep records, books of account or documents that are specifically required by the Commissioner of the South African Revenue Service (SARS) by public notice. On 28 October 2016, the long-awaited final public notice (Public Notice) regarding the record keeping requirements pertaining to transfer pricing transactions was published under the powers afforded to SARS in s29(1)(b) of the TAA.

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;

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; and such transaction contains a term or condition which differs from any term or condition that would have existed had the parties to the transaction been independent vis-à-vis one another and transacting at arm’s length; and the term or condition results in a tax benefit for a party to the transaction; then the tax payable by the benefitting party must be calculated as if the transaction had been concluded between independent parties transacting at arm’s length.

Budget 2016 – An increase in transfer duty – will it dampen the property market?

Last year’s increase in the threshold for transfer duty to R750 000 was positive, but unfortunately no further relief is provided this year for properties on the lower end of the market. Property owners at the top end of the market will, however, be worse off. The Minister announced that the transfer duty rate on properties above R10 million will increase from 11% to 13%. Consequently a new bracket in the transfer duty table will be formed. Transfer duty in this new bracket will, with effect from 1 March 2016, be R937 500 + 13% of the value exceeding R10 million.

Mandatory transfer pricing documentation

Author: Okkie Kellerman (ENSafrica). On 15 December 2015, SARS issued a draft Public Notice that sets out the additional record-keeping requirements for transfer pricing transactions. It proposes extensive and comprehensive documentation requirements that must now be kept by taxpayers with a consolidated South African turnover of R1 billion or more. Although this provides South African taxpayers with clarity on the information that must be retained for transfer pricing purposes, these requirements are fairly onerous and will increase the compliance burden of these taxpayers, resulting in additional costs.   

Transfer pricing drains us of tax blood

Author: Xolani Mbanjwa (Fin24) Transfer pricing by multinationals has cost South Africa an estimated R250 billion over three years and, with it, lost tax revenue. This is according to Sunia Manik, group executive for the large business centre at the SA Revenue Service (SARS), adding that it was being done through “service payments” made to overseas businesses, and was eroding the country’s tax base. Speaking about the new transfer pricing guidelines from the Organisation for Economic Cooperation and Development (OECD) at a seminar in Johannesburg this week, Manik said the figure included almost R80 billion in so-called management fees paid overseas from South Africa.