Strategizing Multinational Tax Risks

S, Africa’s new interest limitation on related party debt, approximating 40% of EBITDA, is effective as of 1/1/2015.  The new rules are prescribed prior to the OECD BEPS Action 4 Guidelines re: interest limitations.  Disallowed interest is carried over indefinitely, subject to the subsequent year’s limitation.

PwC’s guidance is provided for reference:

Click to access pwc-south-africa-introduces-interest-deduction-limits-debts-owed.pdf

As countries aggressively enact BEPS incentives with unilateral legislation, the premise of worldwide consistency for new OECD guidelines diminishes virtually daily.  New legislation also reduces the country’s further incentive to change such legislation to align with final OECD guidelines.

As S. Africa’s new rules demonstrate, there should be a BEPS champion/team in place at MNE’s to capture such changes worldwide and measure such impacts upon the global organization.  Additionally, future strategic planning should consider current BEPS initiatives, and unilateral legislation that has been passed, to measure tax efficiencies of current and future debt structures.