On 15 December 2015, SARS issued a draft Public Notice that sets out the additional record-keeping requirements for transfer pricing transactions.Taxand South Africa discusses this update.
It proposes extensive and comprehensive documentation requirements that must now be kept by taxpayers with a consolidated South African turnover of R1 billion or more.
Although this provides South African taxpayers with clarity on the information that must be retained for transfer pricing purposes, these requirements are fairly onerous and will increase the compliance burden of these taxpayers, resulting in additional costs.
The notice introduces the new term of “potentially affected transactions” which refers to all cross border transactions with the connected persons as listed in section 31, regardless of whether the terms and conditions of such transaction are different from the terms and conditions of an arm’s length transaction.
In other words, where the focus on preparing a transfer pricing policy is only on those transactions that are not at arm’s length, the transfer pricing documentation must now deal with all such connected party cross-border transactions.
Although we appreciate SARS’ need for information which will allow it to properly assess the transfer pricing risks of taxpayers, SARS has not aligned itself with the recommendations of the OECD under Action 13.