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.