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. The finance minister pulled a few tax levers to increase revenue, one of which is the dividends tax. Which went up from 15% to 20%. From a transfer pricing perspective, this has the effect of increasing the secondary adjustment in South Africa as well.
There are different viewpoints in South Africa on whether a DTA could reduce the secondary adjustment (deemed dividend) or not. Owing to the fact that the intention was that the secondary adjustment should not be reduced by a DTA, I believe it should not but this has not been tested in court and there is merit in saying it could be. But that is a topic for another day.
The ATO acknowledges that TP documentation is time and cost intensive and therefore introduced simplified TP record keeping options where the administrative burden is disproportionate to the risk of not complying with the transfer pricing rules.
If a taxpayer applies the simplified TP record keeping options under this Guideline, the ATO will not allocate compliance resources to review the covered transactions or arrangements specified in that option for TP purposes, beyond reviewing the taxpayer’s eligibility to use the option that was applied.
The simplified TP record keeping options are available, subject to a number of qualifying conditions, such as: small taxpayers, distributors, low-level inbound and outbound loan transactions, certain intra-group services (including technical, management, and administration services), and taxpayers with a low level of international related-party dealings.
“Singapore’s 2017 Budget was handed down on February 20, 2017 by the Minister for Finance, Mr, Heng Swee Keat. It contains many tax changes including a new Intellectual Property (IP) regime that IRAS notes incorporates the BEPS-compliant modified nexus approach. The new IP Regime is designed to encourage the exploitation of IP arising from research & development (R&D) activities of the taxpayer.
To encourage the use of IPs arising from taxpayer’s R&D activities, the Budget announced that IP income would be incentivized under a new IP Regime named the IP Development Incentive (IDI). The IDI would incorporate the BEPS-compliant modified nexus approach…”
“The CRA has the power to make a transfer pricing adjustment to any amount for a taxation year under s. 247(2) in respect of a non-arm’s length cross-border transaction. A taxpayer is also liable to a 10% penalty under s. 247(3), which penalty is determined with reference to the taxpayer’s transfer pricing capital adjustment and transfer pricing income adjustment for the year…”