Summary SA transfer pricing compliance rules

Country-by-Country reporting

Multinational Entities (“MNEs”) impacted are defined in the South African CbC regulations as having a total consolidated group revenue of more than R10 billion or €750 million. This is applicable when the Ultimate Parent Entity (“UPE”) submits the CbC report and is a tax resident within South Africa. Also this is applicable when a South African resident Constituent entity must submit the CbC report on behalf of the non-South African tax resident UPE. The CBC report must be submitted no later than 12 months after the last day of each reporting fiscal year of the MNE group beginning or after 1st January 2016. For MNEs with a December year end an extension was granted by SARS until 28 February 2018 to submit CbC reports.

 

Master and local files

If the aggregate of a person’s potentially affected transactions (cross border connected party transactions) for the year of assessment, without offsetting any potentially affected transactions against one another, exceeds or is reasonably expected to exceed R100 million, and that person is a South African resident, the person must submit a return in the specified form relating to a:

  • master file, where the ultimate holding company in respect of the Group that the person is a member of is a resident, or where a master file that substantially conforms with Annexure I to Chapter V of the OECD Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations 2017 is prepared by any other entity within the group that the person is a member of; and
  • local file.

 

Local transfer pricing documentation

In terms of the Tax Administration Act, where the thresholds set out above are not applicable, taxpayers that engage in an affected transaction/s must still keep the records, books of account or documents that enable the taxpayer to ensure and SARS to be satisfied that such affected transaction/s is conducted at arm’s length.

 

Summary conclusion

All South African resident taxpayers engaging in affected transactions must prepare transfer pricing documentation, but the nature and extent of the documentation to be prepared and potentially submitted will vary, depending on whether they fall above or below the thresholds discussed above.

Kindly contact Nico Kruger, Transfer Pricing Specialist on mobile: +27 79 520 2822 or via email: nico@wts-southafrica.com for more information and details.