Multinationals are preparing for strong compliance headwinds
12 September 2016
Posted by: Author: Amanda Visser
Author: Amanda Visser (BDlive)
Multinational companies are facing increased integrated tax audits, more tax compliance obligations and more international financial reporting requirements in the next year.
The introduction of country-by-country reporting by multinationals as part of a global effort to stem base erosion and profit shifting will not only significantly increase the compliance burden, but also the compliance cost.
Tax directors from financial institutions and telecommunication companies attending the annual Tax Indaba highlighted challenges facing their companies in SA, but specifically in Africa.
Withholding taxes on services rendered in countries outside SA, the disregard of double tax agreements and the number of taxes that have to be complied with remain major concerns.
Vodacom tax director Shane Govender says they are dealing with about 35 taxes that relate to the telecom industry in the Democratic Republic of Congo (DRC). In Tanzania, they have to deal with 25 different taxes.
"That is a huge compliance burden and to remain on top of everything, especially if one does not have someone who has knowledge of the tax system in that particular country, is a major challenge."
PPC tax director Sebueng Mthembu says language remains a barrier to understanding regulations to be fully compliant. Legislation in some African countries is not as comprehensive as in SA. "In the DRC, legislation is grey — and that is putting it politely. We have to deal with around 70 different taxes in the DRC."
Mthembu says they have to employ a tax professional in every country in Africa, no matter how small the operations. "We now often have to consider the tax implications against the cost of keeping a tax professional in the country."
Leon Coetzee, head of tax at FirstRand, says their group has to issue close to 20-million tax certificates every six months reporting the investment income and other forms of information to the South African Revenue Service (SARS).
An issue that seems to be a universal problem for small and large companies is the withholding of refunds to which they are entitled.
Puma Energy’s Africa tax manager Eric Ketchemin says there is a "massive disconnect" between the company and tax authorities when it comes to refunds.
"We are a trading company and we cannot afford our refunds sitting with tax authorities across Africa." He says that means tax authorities are in control of their working capital.
Telkom tax executive Tosca dos Santos says although they have not experienced an increase in audits, they are audited annually.
"The documentation you retain today is not necessarily what SARS is going to ask for in three years’ time, and that is the challenge," she says.
"You can be as prepared as possible, but you never really know what is coming," says Dos Santos.
This article first appeared on bdlive.co.za.