For inbound companies (from India, coming here) the survey indicates that the Eskom energy crisis and obtaining work permits are also significant challenges.A total of 57% of survey respondents felt that the tax regime in South Africa did not pose a real challenge to their company and regarded this country to be in line with global tax systems.However, many felt that the personal tax rate was too high compared to the benefits received.
The majority of respondents utilised a branch when establishing operations in South Africa.They felt their operations were fully compliant with all tax and regulatory aspects and they had well structured internal control mechanisms and/or well documented tax risk control policies in place.Respondents found South African exchange controls to be burdensome.Of the inbound respondents, 62% utilised the services of auditing firms when seeking advice on investment in South Africa.
Social and cultural challenges
For outbound companies (those in South Africa moving to India) India is viewed as an excellent investment opportunity: However, to overcome social and cultural challenges - and to perhaps benefit from lower corporate tax rates for local businesses - the majority of the respondents used or were considering the use of a joint venture with an Indian enterprise.
Obtaining work permits and lack of infrastructure and support services posed the next greatest challenges to outbound businesses.The majority of survey participants found the corporate tax regime in India to be complex and rigid and the foreign corporate tax rate exceeded 40%. Despite the taxation complexities, most SA respondents did not have a comprehensive tax risk control policy.Most utilised the services of auditing firms when seeking advice on investments in India.
Naik says all of the participants surveyed were interested in obtaining assistance from a dedicated India-SA team with experience in advising on both inbound and outbound investment."Advice on mergers and acquisitions, expatriate tax and work permits were areas where respondents indicated the greatest degree of interest.”
Indian respondents in the survey included Bank of Baroda, ICICI Bank, Mahindra and Mahindra, Ranbaxy Pharmaceuticals, Satyam Computer Services, State Bank of India, Tata Steel and Zee TV.
Source: By Troopti Naik (TaxTALK)