South African tax authority has been proposed that South Africa’s transfer pricing legislation relating to “secondary adjustments” be amended. The proposal placed to the Draft Tax Laws Amendment Bill 2014.
Generally, a “secondary adjustment” refers to a constructive transaction (a secondary transaction), whereby excess profits coming from a primary adjustment are treated as having been transferred in some other form and taxed accordingly. Ordinarily, secondary transactions take the form of constructive dividends, constructive equity contributions or constructive loans.
The new rule come into effect from 1 January 2015 whether the secondary adjustment would be in the form of a deemed dividend paid by the resident and consisting of a distribution in specie.
