African countries dominated the news this week in relation to transfer pricing. The theme throughout the different articles is very similar: there is a lot of information sharing between African countries (and worldwide), additional requirements have been introduced in order to keep in line with OECD requirements (e.g. transfer pricing documentation requirements), and countries are under additional pressure to increase revenue collection without increasing taxes. The last point is likely to result in additional audits and transfer pricing has been identified as an area where tax authorities should increase efforts to ensure correct pricing and believe they can collect additional revenue.
See below a summary of the articles that I found most striking.
The South African Revenue Service (SARS), through its transfer pricing unit, has already upped its audits of multinational companies in recent years, resulting in transfer pricing adjustments running into billions of rand in additional income tax…
This has been in the news by various authors, so I will just replicate the first paragraph.
“New developments in terms of the Tax Administration Act 2011 now require certain entities to keep transfer pricing documentation for submission to the South African Revenue Service (SARS). SARS has now finalised the previously 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 Federal Inland Revenue Service (FIRS) has begun Transfer Pricing audits and has been requesting TP documentation and other documents from taxpayers relating to their related party transactions. These actions are in line with its powers under the Income Tax (Transfer Pricing) Regulations No. 1 of 2012 and Federal Inland Revenue Service Establishment Act… However, the good news is that a taxpayer has, at its disposal, a number of dispute resolution mechanisms under Nigerian law each with its implications…”
“Revenue collection agencies in the five-nation East African Community plan to develop a framework to share intelligence real time.
This is in a bid to combat rising cases of tax evasion through cross-border trade, with technical help from the World Bank.
Commissioners of tax investigations and enforcement from Kenya, Tanzania, Uganda, Rwanda and Burundi on Friday said they are working on a mechanism to share intelligence on possible taxation fraud…”
“Woodhouse said that the Government is considering measures that will make it harder for multinationals to avoid having a taxable presence in New Zealand if they are involved in significant economic activity there. The Government is also looking to release proposals next year to bolster New Zealand’s thin capitalization rules, to ensure that foreign-owned firms cannot shift excessive profits out of New Zealand.
The Government will also take adequate measures in 2017 to neutralize the effects of hybrid mismatches and is closely monitoring the progress made by the UK and Australia in this area. It is also closely watching what Australia and the UK are doing in regards to Diverted Profits Tax. “Officials have provided some advice to the Government and we will look to say more on this in the near future,” he said…”
The article provides a summary on the latest developments within Africa, specifically, it discusses the following:
- ECOWAS: Regional transfer pricing meeting held in Abuja
- Ethiopia: Treaty between Ethiopia and Saudi Arabia enters into force
- Namibia: 2016/17 Mid-year Budget presented to Parliament
- Namibia: Scrapping of tax certificate of good standing certificate requirement
- Liberia: Goods and services tax rate increased
- Malawi: Tax Amendment Laws enacted
- SADC: SADC-EU Trade Treaty comes into effect
- Seychelles: Treaty with Guernsey enters into force
- South Sudan: 2016/17 Draft Budget presented
- ZAMBIA: Electronic payment system rolled launched
“The BEPS project’s new transfer-pricing notion of “cash box” appears to be inconsistent both with commercial reality and with longstanding Canadian outbound international tax policy…”
Formal Document Requests – The IRS’s Tool for Collecting “Foreign-Based Documentation” (National La Review)
“Code Section 982(c)(1) authorizes the IRS to issue an FDR to any taxpayer to request “the production of foreign-based documentation.” An FDR supplements the IRS’s summons authority and its purpose is to discourage taxpayers from delaying or refusing to disclose certain foreign-based documentation to the IRS. Taxpayers should be aware of FDR procedures because failure to respond – either through substantial compliance or some alternative permissible action – within the statutory 90-day response period could result in significant consequences concerning the admissibility of FDR-requested items in future civil proceedings…”