The South African Revenue Service (SARS) released its final notice re: requirements for filing the Country-by-Country (CbC) report, Master File and Local File, in alignment with OECD BEPS Action Item 13.
It is interesting that, pursuant to minimum thresholds, both a Master File and Local File are required to be filed, rather than only the Local File. This may become more of a norm, versus an exception, as the global transfer pricing and risk environment will need to be reviewed in alignment with local business operations. Hopefully, the review will encompass confidential limitations on the information received and will only encompass transfer pricing practices of the local operations rather than extend CbC presumptions or Master File analogies against the local data.
EY’s Global Tax Alert provides the relevant details of the SARS requirement.
KPMG’s summary provides details for contemporaneous reporting (i.e. within 45 business days) of “reportable arrangements” that include acquiring a controlling interest in a company with loss attributes, hybrid debt/equity instruments, contributions to/beneficial interests in foreign trusts, and certain arrangements with foreign insurers.
The hybrid debt/equity arrangements are aimed at tackling BEPS substance vs. form transactions, although this unilateral guidance precedes final OECD guidelines and thereby represents an additional reporting requirement for such instruments, notwithstanding potential taxation of related dividends or denial of deductions for related interest.
The public notice also provides for “excluded arrangements” where the aggregate tax benefit does not exceed R5M, although the exclusion for transactions where a tax benefit was not the main, or one of the main, purposes of the arrangement appears to have been removed from this new legislation.
This new “contemporaneous” guidance provides a very small window for reporting “reportable arrangements” to the South African Revenue Service (SARS). Accordingly, a review of current and prospective arrangements in S. Africa should provide for timely reporting governance guidelines.