The South African Finance Minister Nhlanhla Nene proposed new transfer pricing documentation and reporting rules and proposed to revise controlled foreign company (CFC) rules relating to the digital economy, in his budget speech for 2015.
The proposals will be in line with the OECD work on base erosion and profit shifting (BEPS) and will be consistent with a December 2014 report, prepared by the Davis Tax Committee, which advises the government on how to react to OECD BEPS output. New documentation rules will reduce financial leakages which deprive the economy of billions of Rand through erosion of the tax base, profit shifting and illicit money flows. Action has to be taken to close tax evasion loopholes such as shifting profits by adjusting transfer prices or other methods employed by South African corporates.
Nene said the government is considering relaxing rules designed to counteract BEPS that impose capital gains tax on cross-issue of shares. These rules may be affecting legitimate commercial transactions and curtailing growth, the government said. Changes are proposed to rules concerning withholding on disposal of immovable property by non-residents. Further, clarifications are proposed to the definition of interest for purposes of withholding taxes, he added.
