In line with the OECD base erosion and profit shifting (BEPS) initiative (action 13), effective 1 January 2016, South Africa Revenue Service (SARS) has announced that it will implement country-by country (CbC) reporting. The CbC report is the third tier of the recommended documentation proposals from the OECD, with the other two tiers being a group master file and local country files. The CbC report will function as the risk assessment tool, while the master file will function as the basis for a transfer pricing audit.
The aim of CbC reporting is to provide the tax authorities in the jurisdiction of the ultimate parent company with an overview of the aggregate tax position of a multinational enterprise (MNE), and the allocation of revenue across the jurisdictions in which the MNE operates. The CbC report is structured to provide insight into the group’s places of economic activity through the number of people it employs and its functional activity, so that the authorities can map economic activity and substance to reported revenue and tax payments.
South African-headquartered MNEs will be required to submit the CbC report to the SARS, which will share the report (as well as the master file) with relevant tax authorities through the exchange of information process.
