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Taxation
Thursday, December 17, 2015 - 03:16
Looming compliance deadline

At a recent Deloitte event on Base Erosion and Profit Shifting (BEPS), the South African Revenue Service (SARS) announced its intention to adopt the latest OECD recommendations on the Country by Country (CbC) reporting by as early as 01 January 2016.
“The OECD recommended an implementation date of 01 January 2016 and it appears SARS is intending to adopt this.  In brief, the CbC aims to provide SARS with an overview of the aggregate tax position of a multinational company operating in South Africa as well as the allocation of revenue across the jurisdictions in which the multinational operates,” explains Karen Miller, transfer pricing leader at Deloitte in the Western Cape.
The CbC report is structured to provide SARS with an insight into the group’s places of economic activity through its employees and functional activity so that it can map economic activity and substance to reported revenue and tax payments.  Fundamentally, CbC is intended to assist the tax authority to do a transfer pricing risk assessment.  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 the Local Country Files.
“The intention is that all these documents work together to provide tax administrations with sufficient information to make an informed decision on the level of transfer pricing risk as well as the basis for an audit and possible transfer pricing adjustment,” says Miller.
She says that this particular BEPS recommendation is referred to as a “minimum standard” requirement, which means that it must be adopted by all countries (including South Africa) which are party to the OECD’s BEPS initiative.  It will apply to multinationals headquartered in South Africa which have an annual consolidated turnover in excess of €750m.
“It is likely that in addition to the information request proposed in the OECD’s recommendations, SARS will include additional disclosure requirements of its own.  We await these precise disclosure requirements.  Practically, this means that South African headquartered multinationals which meet this criteria should be considering whether their systems are adequate to pull the information that will be required and, if not, what system upgrades may be required,” says Miller.
In addition, she says that it will be important to ensure that an audit trail supporting the source of the data is maintained.
“Although not specifically announced, it is also possible SARS will extend these parameters to the requirement for South African headquartered multinationals to prepare transfer pricing documentation to support their intra-group transactions,” concludes Miller.

Copyright © Insurance Times and Investments® Vol:28.12 1st December, 2015
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