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.

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

South African transfer pricing regulations amended to amass taxpayers

The South African Draft Taxation Laws Amendment Bill (TLAB) has been released for comment. It has been a while since we’ve seen a material change to the transfer pricing regulations. The current inclusion of the “associated enterprise” definition into the transfer pricing regulations is welcomed as it aligns South African legislation to global standards.

The draft TLAB has not removed the connected person concept within section 31 but added the associated enterprise definition to the affected transaction definition. Therefore, a transaction, operation, scheme, agreement or understanding still has to fall within the four provided scenarios under section 31(1)(a), but now the persons in relation to the affected transaction can either be a connected person or an associated enterprise.

Continue reading “South African transfer pricing regulations amended to amass taxpayers”

Weekly transfer pricing roundup – 05 June 2017

The cat is finally out of the bag. SARS released a public draft notice that requires taxpayers to file their transfer pricing master file and local file with the tax return. The threshold is set at R100mil of total aggregate cross border related party transactions. This is lower than thresholds introduced in Europe but in line with the previous documentation retention requirements, which came into effect 1 October 2016. As always make sure you consider all thresholds throughout the countries you operate in, to make sure you are compliant around the world (same is true for CBCR). Continue reading “Weekly transfer pricing roundup – 05 June 2017”

Weekly transfer pricing roundup – 29 May 2017

Our transfer pricing seminars went well last week, both in Kenya and South Africa. Thanks for those of you who attended, it was great catching up. If you missed them, check out my twitter feed for some quick updates.

This week the OECD released a new discussion draft providing guidance on hard-to-value intangibles (HTVI). The approach to HTVI was previously agreed to and is published in the BEPS Action 8-10 final report. You may remember the whole ex post and ex ante discussion.  Continue reading “Weekly transfer pricing roundup – 29 May 2017”

Weekly transfer pricing roundup – 17 April 2017

The UN provided us with some holiday reading in the form of an updated 2017 United Nations Practical Manual on Transfer Pricing for Developing Countries, designed to give concrete advice to developing nations on administering transfer pricing laws. I have not yet read the 680 odd page manual but there are some very interesting things in here. It feels like I have to take a weeks leave to read and study the full manual. The 2017 UN transfer pricing manual includes: Continue reading “Weekly transfer pricing roundup – 17 April 2017”

Weekly transfer pricing roundup – 13 March 2017

As I am sitting in my hotel room, getting ready for my presentation today, I remembered a great documentary called, “The Price We Pay”. If you should find yourself in a tight spot to explain the issues that brought us BEPS, just put on this trailer. Continue reading “Weekly transfer pricing roundup – 13 March 2017”

Weekly transfer pricing roundup – 27 Feb 2017

Last week, South Africa held its budget speech and it was confirmed that South Africa is and will remain part of the BEPS project and sign up for the necessary requirements. Furthermore, it was mentioned that South Africa will continue to develop skills needed to address transfer pricing, meaning SARS (the tax authority) will increase its staff size and skill set to review current TP arrangements and ensure relevant compliance.

Most countries require additional funding around the world and without an increase in economic growth the only other way to really increase government revenue is by increasing taxes. South Africa did not escape this. Continue reading “Weekly transfer pricing roundup – 27 Feb 2017”

SA finalised specific regulations for CbC reporting

The final South African regulations for country-by-country (CbC) reporting were gazetted on 23 December 2016. With the release of the final regulations, South African multinational group companies are now obliged to report certain information in line with the Base Erosion and Profit Shifting (BEPS) project, directed by the Organization for Economic Co-operation and Development (OECD).

The final regulations have not changed from the previous draft and are in line with the OECD BEPS Action 13. The first reporting period is to commence for fiscal years starting on or after 1 January 2016 (reporting fiscal year). This means that the first CbC reports will be required to be filed with SARS from 31 December 2017.

South African taxpayers that are not the reporting entity (which is generally the top company that has an obligation to submit a CbC report in a multinational group) are referred to as a constituent entity and will have to notify SARS of the reporting entity 12 months after the last day of the reporting fiscal year.

The consolidated group revenue threshold (which is either R10 billion for South African held group companies or 750 million Euro for foreign group companies) which require certain taxpayers to submit a CbC report or notify SARS have not changed.

If you have any questions, please let me know below or contact me.

Weekly transfer pricing roundup – 14 November

updateOur preparations to present at the TP Summit are in full swing and include some really interesting topics. If you want to hear more about notification requirements for CBCr (some deadlines are already by December 2016) or what royalties and services have to do with customs and transfer pricing come join me. It is going to be interesting and fun.

But for this post we shall stick to the latest developments which includes South Africa introducing transfer pricing documentation retention requirements and the former federal treasurer (of Australia) accusing BHP of stripping profits into Singapore.

By the way, I have been tracking the stats for the posts and they are always growing, thanks to you. But please don’t forget to share or like the posts if you think they are valuable to share the love.

Transfer pricing documentation now compulsory in South Africa, and more!

SARS has finalised the previous discussed draft notice which requires taxpayers to keep certain records, books of account or documents as prescribed in the notice, in terms of section 29 of the Tax Administration Act, 2011. The notice which was gazetted on 28 October 2016 requires certain taxpayers to maintain transfer pricing documentation on an annual basis, and more.

Swan urges BHP to explain tax affairs (news.com.au)

“Former federal treasurer Wayne Swan says the board of mining giant BHP Billiton must explain how the company sought to evade $300 million in Queensland state royalty payments…

The Labor MP has accused BHP of using a Singapore tax shield to smuggle profits out of Australia.

“The evidence against BHP is damning. Over a decade, they have ramped up their Singapore marketing hub to camouflage aggressive transfer pricing,” he said…”

SEC Roundup: Accenture in IRS Real-Time Audit Program (BNA)

“Accenture Plc, the world’s largest consulting firm, has entered the IRS program for continuous, real-time auditing and expects a decrease in its reserves against possible transfer pricing issues, according to filings with the U.S. Securities and Exchange Commission.

Accenture was one of 10 companies to report significant transfer pricing and international corporate taxation issues during October. An alphabetized list follows…”

The article lists the following companies with excerpts from the filings:

  • Accenture Plc
  • Bristol-Myers Squibb Co.
  • Celestica Inc.
  • Edwards Lifesciences Corp.
  • Jabil Circuit Inc.
  • Microsoft Corp.
  • Quaker Chemical Corp.
  • Rowan Companies Plc
  • Team Inc.
  • Visteon Corp.
Israel to Tax Earnings from International Money Transfers (BNA)

Nov. 7 — A multinational company based in a jurisdiction that has no tax treaty with Israel must pay Israeli taxes on its Israel-related earnings from international money transfer services, the Israel Tax Authority determined.

The ruling is set to apply to the growing number of financial service firms entering the Israeli market, if they are located in a country not covered by a tax treaty with Israel, a senior Tax Authority official told Bloomberg BNA Nov. 3.

Israeli practitioners said the small number of developed countries without such treaties and other formulas available under transfer pricing regulations will greatly limit its use.

More worrisome, they said, is the Tax Authority’s growing appetite for taxes from international transactions by foreign businesses…”

Nokian Tyres tax dispute proceeds. The Company is now finally in position to appeal to the Administrative Court (Business Wire)

“The Board of Adjustment of the Finnish Tax Administration held the reassessment decision from the Tax Administration unchanged related to additional taxes EUR 62.8 million but decreased the amount of punitive tax increases and interests from EUR 31.3 million to EUR 26.4 million concerning tax years 2007-2010. The decision of the Board of Adjustment was not unanimous…”

Transfer pricing documentation now compulsory in South Africa, and more!

The South African Revenue Service (SARS) has finalized the previous discussed draft notice which requires taxpayers to keep certain records, books of account or documents as prescribed in the notice, in terms of section 29 of the Tax Administration Act, 2011. The notice which was gazetted on 28 October 2016 requires certain taxpayers to maintain transfer pricing documentation on an annual basis, and more.

The gazetted notice has not changed from the draft notice except for increased thresholds and an additional section, section 7, which allows for an alternative arrangement with SARS for financial assistance transactions. The increase threshold will elevate some burden for smaller businesses but is still easily met, especially by those firms which mainly deal with cross border related parties (e.g. importers).

The gazetted threshold was increased for potentially affected transactions from an aggregate value of more than R50 million or more than 5% of total gross income and R50 million to more than R100 million (USD 7.45mil). Importantly the aggregate value is determined without offsetting any potential affected transactions against one another and the R100 million is applicable where it is reasonably expected that for the current year of assessment that threshold will be met. Additionally, Paragraph 4 now only relates to potentially affected transactions which exceed, or are reasonably expected to exceed R5 million in value instead of R1 million which was initially stated.

The notice is applicable for years of assessments commencing on or after 1 October 2016.

If you have any questions on how this may affect you, please let me know.