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  • Transfer Pricing Revised Guidelines Released

Transfer Pricing Revised Guidelines Released

26 February 2016

By Roxanna Nyiri, Head of International Tax and Transfer Pricing

The OECD published its requirements for Country-by-Country Reporting as part of the revised Chapter V to the OECD Guidelines, with a new three-tiered approach to transfer pricing documentation:

  1. Master file
    • High-level overview of the MNE group business
  2. Local file
    • Detailed information on specific group transactions
  3. Country-by-Country Report
    • Aggregate, jurisdiction-wide information on global allocation of income, taxes paid, indictors of economic activity

This information is designed for transfer pricing risk assessment and for evaluating other BEPS-related risks by Revenue Authorities worldwide.

The Davis Committee – the tax review committee appointed by the Minister of Finance – is of the view that the OECD’s recommendation under Action Plan 13 should also be adopted in South Africa. Accordingly, in terms of the OECD’s Country-by-Country Reporting Implementation Package, the ultimate parent entity of a large multinational business with a group turnover of over R1 billion in SA will be required to provide aggregate information annually to SARS in each jurisdiction where they do business.

The information to be provided to SARS will include

  • global allocation of income and taxes paid;
  • indicators of the location of economic activity within the group; and
  • information about which entities do business in a particular jurisdiction and the business activities each entity engages in.

In addition, the Davis Committee recommends that the Country-by-Country Report for SA should contain additional transactional data regarding related party interest payments, royalty payments and especially related party service fees. Table 1 below presents a template for the Country-by-Country Report.

A model template for the Country-by-Country Report

  • Table 1: Overview of allocation of income, taxes and business activities by tax jurisdiction

For more information, please contact Roxanna Nyiri.