Budget 2020: MNEs must avoid being double-taxed by government’s new proposal

In the South African Budget 2020 speech, the Minister of Finance announced that government would be restructuring the corporate income tax system by broadening the tax base in order to potentially reduce the rate in future.

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Transfer pricing in Mozambique

On 12 September 2017, the Council of Ministers approved the Mozambican transfer pricing legislation, which was published in the Official Gazette on 6 December 2017. The provisions of the transfer pricing legislation thereafter came into effect from 1 January 2018. These provisions were enacted into law to ensure that taxpayers transact on arm’s length terms and conditions with related parties, as they would with independent parties. Where a related party transaction is not arm’s length, the tax authority in Mozambique (MTA) could adjust the taxable profit of the taxpayer, as if the transaction was in fact arm’s length.

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Transfer pricing in Botswana

A key talking point in the recent amendments to the Income Tax Act of Botswana, promulgated in December 2018, was the introduction of transfer pricing rules that took effect 1 July 2019. The introduction of transfer pricing requires taxpayers to transact at arm’s length with any connected person, local or foreign. However, the local transactions are limited to those involving an International Financial Services Centre company. This differs from most other jurisdictions where the transfer pricing rules only apply to cross border related party transactions.

Taxpayers also need to prepare and potentially submit relevant transfer pricing documentation to support the arm’s length nature of the transactions. The documentation requirements, as recommended by the OECD, should include detailed information about the transactions entered into, the related entities, the nature and summary of company activities as well as any agreements and an overall group transfer pricing policy. When submitting the documentation, the regulations require a taxpayer to submit a local file together with the tax return and a master file will have to be submitted if transactions with connected persons are more than BWP5 million. Should a transaction between connected persons not take place at arm’s length the Commissioner General is authorised to adjust the taxable income so that it is consistent with the arm’s length principle.

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Practical aspects on transfer pricing

Transfer pricing and the inherent arm’s length principle has been around for some time now and many African countries have implemented transfer pricing regulations. In Africa, only about five countries had transfer pricing legislation in place before 2000, now in 2019, only about five countries do not have any arm’s length or anti-avoidance provisions in place dealing with transfer pricing. Out of these countries approximately 40 countries in Africa have some sort of formal transfer pricing documentation requirements, be it in the form of formal submission or retention requirements. 

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Dividends are considered a potentially affected transaction by SARS

I was reading the “How to complete and submit your country by country information” external guide published by SARS and came across the below.

For the purposes of calculating the value of a taxpayer’s annual aggregate (potentially affected transactions): Continue reading “Dividends are considered a potentially affected transaction by SARS”

Nigeria is ready for transfer pricing, are you?

Many of our readers have an exposure to transfer pricing risk in Nigeria, it being the largest African economy by GDP in 2017. So I thought I would share an update on Nigeria’s transfer pricing.

Nigeria has aligned its transfer pricing rules to the recommended approach in the 2017 OECD Guidelines. This includes the CBCR, master file and local file documentation approach as per Chapter V. What I wanted to highlight though is that the Federal Inland Revenue Services (FIRS) has also introduced other changes, including: Continue reading “Nigeria is ready for transfer pricing, are you?”