On 6 March 2024, the South African Revenue Service (SARS) published online the tax court Judgment concerning Case No. IT 14302, providing clarification on how the arm’s length principle is applied in transactions involving related parties.
The South African telecommunications company, as the taxpayer, granted intellectual property rights licenses to its subsidiaries across the globe, earning royalties at a consistent payment rate of 1 percent. The Tax Agency argued that the transactions did not adhere to arm’s length pricing and thus levied additional assessments. They proposed that variable royalty rates be implemented instead of a uniform 1 percent for each subsidiary.