Concern about changes to transfer pricing legislation
02 May 2013
Posted by: Author: Ingé Lamprecht (Moneywebtax)
Source: Ingé Lamprecht (Moneywebtax)
A draft Interpretation Note on the cross-border pricing of goods and services could create uncertainty for foreign investors if it is introduced in its current form.
Deborah Tickle, partner for international and corporate tax at KPMG, explains that the Practice Note that previously dealt with thin capitalisation in relation to transfer pricing dealt with the provision of loans which is seen as a service to South African residents from off-shore connected parties.
The Practice Note provided a safe harbour rule that interest at a rate not exceeding prime plus 2% could be paid on financial assistance from offshore investors of up to three times the investor's fixed capital, without fear of reprisal. Investors would thus be certain that if they adhered to these rules, the tax authorities would not come knocking.
The new draft Interpretation Note published by the South African Revenue Service (SARS), now seeks to eliminate the "safe harbour".
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