Tag: Base Erosion and Profit Shifting (BEPS)

The Multilateral Instrument (MLI), or to give it its full name, the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (BEPS), is a multilateral treaty (agreement) developed by the Organisation for Economic Co-operation and Development (OECD), with the support of the G20, to update the international tax rules through the implementation of a series of tax treaty measures without the need for countries to separately renegotiate each of their existing tax treaties.

South Africa recently tightened its transfer pricing and disclosure requirements, implementing global standards. This was an important step to enable the South African Revenue Service (SARS) to enforce transfer pricing rules and to counter undesired base erosion through profit shifting. However, the question remains what else can be done to address impermissible transfer (mis-) pricing and to stimulate investment into South Africa, as tax collections have not been where they should be and it is expected that further expenditure will be proposed in the 2019 Budget?

A new SA-TIED research study estimates that South Africa loses about 7 billion ZAR a year due to profit shifting by multinational corporations; amounting to about 4% of total current corporate income tax receipts.

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.