Tag: transfer pricing

The South African Revenue Service (SARS) has marginally improved refund payment time frames, but it needs to prioritise improving service delivery and building trust with taxpayers. In his recently delivered Medium-Term Budget Policy Statement (MTBPS), Finance Minister Enoch Godongwana announced a tax revenue shortfall of R22.3 billion.

The fourth edition of our report on cross-border tax in Africa explores shifting trends in transfer pricing (TP) – many related to broader taxation themes – and considers what these may mean for multinational entities (MNEs) and revenue authorities.

In recent times, tax authority queries resulting in transfer pricing adjustments have increased significantly, both globally and in Africa. Often, the outcome of a transfer pricing benchmarking study is an arm’s length range rather than a specific margin or price, and the question arises as to which point within such a range is appropriate and therefore arm’s length?

SARS has published a draft model and proposed legislation to establish an advance pricing agreement programme and is inviting comments on it by the end of January.

In the wake of the COVID-19 pandemic, industries and businesses across Africa are adapting, including rethinking business strategies and supply chains. For multinational entities (MNEs), business restructuring can have transfer pricing implications too.

Transfer pricing audits can be onerous, but taxpayers can achieve a more successful outcome by providing all information requested, anticipating areas of concern, and engaging openly with the South African Revenue Services (SARS).

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?

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.

Multinationals with South African group companies are required to adhere to South Africa’s transfer pricing legislation as found in section 31 of the Income Tax Act, 58 of 1962, which provisions in very simple terms require cross-border transactions (which include loans) to be conducted on an arm’s length basis.

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.