Transfer pricing relates to the transfer of goods or services between members of a multinational group which are tax residents in different countries. Instead of increasing existing taxes or levying new taxes, a way to tackle the looming budget deficit may be to properly implement transfer pricing rules and to ensure appropriate enforcement by the South African Revenue Service (SARS) of such rules.
Transfer Pricing compliance requirements in South Africa have been significantly tightened and a modern transfer pricing system, including electronic transfer pricing return submission, has been put in place.
While the necessary legislative provisions to give effect to the proposed increase are still to be adopted by Parliament, one can accept that the Minister's proposal to increase VAT from 1 April 2018 will be implemented. A number of important issues need to be considered to ensure a seamless transition.
Statistics South Africa (StatSA) released the Community Survey in 2016 noting that a total of 94,760 South Africans have emigrated between 2006 and 2016. A more recent study performed by the Pew Research Centre in February 2018 notes that 900,000 people born in South Africa were living abroad for one year or longer. The top three destinations being United Kingdom, Australia and United States.
The much-anticipated Draft Taxation Laws Amendment Bill came out on 19 July 2017. From an international tax perspective, issues of interest include the proposed changes and additions to the Controlled Foreign Company (CFC) rules. Of concern is the possibility that double tax might be payable in certain cases.
Multinationals in high-tax jurisdictions will now benefit from relaxed IP regulations. The 2017 Budget announced that the regulatory framework regarding cross-border intellectual property transactions is to be relaxed, for both tax and exchange control purposes.