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 Malawi

Effective 1 July 2017, Malawi introduced two transfer pricing (TP) related regulations. Firstly, the Taxation (Transfer Pricing Documentation) Regulation which deals with transfer pricing documentation requirements and secondly the Taxation (Transfer Pricing) Regulation which covers general aspects of TP such as approved methods, key terms, guidance on intangible property, general application and how to test related party transactions. 

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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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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.

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IQR – Exclusive or Inclusive, that is the question

I have spoken a lot about the arm’s length range and when we should use a statistical tool such as the interquartile range (IQR) to derive an arm’s length range. But how do we calculate the IQR practically?

The easy answer is, Microsoft Excel or Numbers (for Mac) will do it for you, you just have to use the right formula. For Numbers this is a little easier as there is only one formula (=quartile) but for Excel users this can become a little more confusing as there are two formulas. Originally, Excel also only had one formula but now you have the option of either using =quartile.inc or =quartile.exc. The previous formula within Excel was equivalent to =quartile.inc, in case you were wondering.

So the questions are: Which formula should I use? Does it make a difference in the range? Will the tax authorities care?

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5618300894_8e86b92fda_bYou like this blog and would love to contribute but don’t know how. You have a great transfer pricing topic which you would like to research and discuss with other writers and a potential wider audience but you not sure how or where to start. You want to keep updated on a more proactive basis and share your knowledge with the community.

If any of the above resembles with you, please reach out to me. There are no monetary rewards here, but you would get your own profile which enables you to post your thoughts on www.transferpricing.co.za. We can also collaborate and/or co-author articles if you are not sure how to get started.

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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Oops, I didn’t get my DTA relief!

Hi there! A quick introduction before we get to business, my name is Shazia and I am the latest addition to the Transfer Pricing team at Grant Thornton. About 10 months back I saw the light and decided to join the TP community and I have not looked back since. Prior to joining Grant Thornton, I was at EY for 3 years where I successfully completed the tax trainee programme. This is my first stab at writing a post for a blog and I am glad to have you walk this journey with me… so here goes…

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Forex gains and losses a no brainer?

Hi all – given that this is my first blog on transferpricing.co.za, a short introduction may be apt. More importantly, given that this is my first blog EVER, please bear with me as I make the transition from formal writing to being BLOGGY. As far as intro’s go, I am a Partner at Grant Thornton in South Africa, heading up the Transfer Pricing practice. I have been consulting on tax matters since 2001, having spent the last 11 years at Grant Thornton and the earlier years at KPMG and EY. Prior to embarking on my tax consulting career, I spent 7 years “on the other side” working in cost and financial accounting and reporting environments the manufacturing and the financial services sectors. More to the topic, I have been involved in TP for 10 years and for so many reasons, love every minute of it…even when people think that a one-pager will suffice as a TP report or policy. Continue reading “Forex gains and losses a no brainer?”