Clarity needed on transfer pricing
With substantial amendments to SA transfer pricing legislation in April 2012 – as well as a lack of any subsequently updated or final Practice Note from SARS – much uncertainty still surrounds the realm of transfer pricing in SA, says Lauren Hart, of Webber Wentzel, in an analysis on the firm’s website.
She argues that while the new regime has been a part of SA law over the past year, ‘the application thereof is unclear and at least one thing is certain: this is not business as usual’. The problem, she says, is that there is relatively little certainty available in the absence of a guiding SARS Practice Note indicating the way forward. ‘SARS has, however, recently issued a draft Interpretation Note on the thin capitalisation provisions in the Act, which includes some guidance as to the debt-to-equity ratio and the shift in the onus from SARS to the taxpayer.’ Hart adds that SARS needs to finalise the anticipated Interpretation Note, ‘which will hopefully contain a new safe-harbour rule, in line with international best practice’. She adds: ‘The draft Interpretation Note only briefly makes reference to a relaxation of the transfer pricing provisions applicable to South African headquarter companies, in an apparent effort to promote the use of SA as the investment hub for African investments. More detailed rules are necessary, and their absence may, as an example, hinder investment into Africa, as the financial assistance offered by group companies is a common modus operandi.’ Hart says that taxpayers and advisers are called to comment on the draft thin capitalisation Interpretation Note, adding that the intended back-dating of this new Interpretation Note to 1 April 2012 is ‘iniquitous and unconstitutional’. She says: ‘The finalisation and issue of this Practice Note is imminent and much anticipated, as it is the hope of taxpayers and advisers alike that the note will shed some light on the numerous areas of concern and confusion in relation to thin capitalisation.’
Full analysis on the Webber Wentzel website
