South Africa: Transfer pricing proposals in 2017 budget

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The Finance Minister of South Africa on 22 February 2017 delivered the budget speech to Parliament. In his speech the Minister mentioned the government’s plan for implementing a statutory transfer pricing regime in South Africa.

The government plans to update and align South Africa’s current transfer pricing guidance with the OECD Transfer Pricing Guidelines and to incorporate new guidance on the arm’s length principle and an agreed approach to the pricing of hard to value intangibles.

South African multinational enterprises are required to file country by country (CbC) reports with the tax authority (SARS) within 12 months from the end of the relevant year of assessment. This applies for years of assessment commencing on or after 1 January 2016. The CbC reports will provide SARS and other governments with the necessary information to identify transfer pricing risks.

Concerning the mutual agreement procedure for dispute resolution, the South African model tax treaty will be updated to incorporate the minimum standards set out in the OECD action plan and recommendations on base erosion and profit shifting (BEPS). However, South Africa has not committed to mandatory arbitration as part of the mutual agreement procedure.

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