Increase in compliance burden for parties to international transactions

By Catherine Arbuthnot, Tax Manager at BDO SA

Notice 1334 of Government Gazette 40375 (issued on 28 October 2016) introduced onerous record keeping requirements for “potentially affected transactions” in certain circumstances. A “potentially affected transaction” includes an international transaction between connected persons as defined regardless of whether the transaction was carried out at arms’ length. These new requirements significantly increase the compliance burden and administration burden of international transactions.

The new requirements apply to potentially affected transactions if certain thresholds, as set out below, are exceeded. If the thresholds are not exceeded the taxpayer would have to discharge the onus of proving that an “affected transaction” did not fall foul of the arm’s length test. Documentation sufficient to discharge the onus of proof should therefore, regardless of the new thresholds and requirements, have to be maintained.

The thresholds and new requirements (section 29 of the Tax Administration Act) fall into two categories:

1. if the aggregate value, without offsetting any transactions, of potentially affected transactions is reasonably expected to exceed R100 million in a year of assessment, a detailed list of the information relating to the affected entity’s structure and operations which must be kept, including industry information.
2. ii) if the aggregate value is reasonably expected to exceed R100 million in a year of assessment and the value of any individual potentially affected transaction exceeds R5 million, a long and detailed list of the information must be kept for that transaction.

The Notice is available on the SARS website:

SARS Notice

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