Amidst government’s plans to clamp down on base erosion.
The Government has drawn the line for companies that seek to use debt and other means to decrease their tax base. Multinational companies need to keep abreast of legislative developments and position themselves to best cope with what can be a fresh and increasingly global approach to dealing with tax planning for cross-border transactions, says PwC Tax Services.
In order to curb excessive interest deductions, National Treasury recently issued proposals contained in the draft Taxation Laws Amendment Bill, 2013. Deductions that are perceived to be excessive are typically channeled as interest, royalties, services fees and insurance premiums. "Although financing in the form of debt is commonly used for legitimate commercial reasons, it can also be used as a means to erode the tax base, a concern for tax authorities the world over," says David Lermer, South Africa and Southern Africa Region Leader for PwC Global Tax Services.
Section 240A of the Tax Administration Act, 2011 (as amended) requires that all tax practitioners register with a recognized controlling body before 1 July 2013. It is a criminal offense to not register with both a recognized controlling body and SARS.