Corporate tax amendments have been proposed in the Draft Taxation Laws Amendment Bill 2019, referred to as “initial 2019 TLAB.” The primary change is to address potential dividend stripping schemes, with comments due by 25 June 2019. Draft legislation is expected in July 2019.
To the extent that corporate reorganizations/dividends are envisioned in S. Africa, this legislation should be reviewed, with valuable comments provided to ensure fairness in the final legislation.
EY’s Global Tax Alert provides details on this development.
Click to access 2019G_002864-19Gbl_South%20Africa%20-%20Prop%20corp%20tax%20rules%20-%20anti-tax%20avoidance%20measures.pdf
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.
Click to access 2017G_05868-171Gbl_TP_South%20African%20RS%20releases%20Public%20Notice%20concerning%20CbCR%20master%20and%20local%20file.pdf
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.