South Africa

Market overview

As a result of the changing international tax climate, South Africa made a number of amendments to its transfer pricing system this year. Although not a member of the OECD, the country remains a front-runner in applying measures outlined in the BEPS Project.

South Africa has been quick at adopting the OECD recommendations and a number of BEPS points have been implemented. On April 11 2016, the South African Revenue Service (SARS) published draft regulations regarding country-by-country reporting (CbCR) for multinational enterprises. This draft followed the country's signing of the OECD's multilateral competent authority agreement for the exchange of CbC reports in January this year. The regulations are effective for tax years beginning on or after January 1 2016 and the first reports must be filed by December 31 2017.

"The area where we see the most activity is the area of BEPS. South Africa has had significant new rules introduced. We've had transfer pricing for a long time, draft regulations are out now which is going to make documentation compulsory," said Billy Joubert, head of transfer pricing at Deloitte.

On December 15 2015, the SARS issued another draft notice regarding TP documentation setting out additional record-keeping requirements, although it is yet to be finalised. On July 28 2016, the SARS issued draft public notice asking for comments on TP documentation to be submitted by August 19.

As in many other jurisdictions around the world, TP professionals have been busy as taxpayers are asking more questions and are more aware of their structures. "BEPS is a very big topic in South Africa and globally, and we are very aware of what is going on and are close to the ongoing BEPS discussions," said Joubert.

Reassuring taxpayers that their structures are BEPS compliant has been a service in high demand this year, while advisers also saw a growing demand for dispute advice as the authorities increased the amount of audits they were conducting, with a clear agenda to try and collect funds.

"South African multinationals are very much trying to get to grips now with what this [BEPS] actually means for them," said Anne Bennett, head of tax and transfer pricing at Webber Wentzel.

SARS has been busy adapting to the regulation changes and radically enhanced the size of its internal transfer pricing team. Despite some departures of senior people to the private sector recently, SARS have said it intends to keep growing the team, advisers reported.


Tax authorities

South African Revenue Service
Visiting address: Lehae La Sars, 299 Bronkhorst Street, Nieuw Muckleneuk, 0181 Pretoria
Postal address: Private Bag X923, Pretoria 0001
Tel: +27 12 422 4000
Website: www.sars.gov.za


Tax rates at a glance

(As of January 1 2016)

Corporate income tax 28% (a)
Capital gains tax rate 18.648%
Branch tax rates 28% (a)
 
Withholding tax
Dividends 15% (b)
Interest 15% (c)(d)
Royalties from patents, know-how, etc 15% (d)
Services 15% (d)
Branch remittance tax n.a.
 
Net operating losses (years)
Carry-back 0
Carry-forward Unlimited

  1. The mining income of gold mining companies is taxed under a special formula, and the non-mining income of such companies is taxed at a rate of 28%. Special rules apply to life insurance companies, petroleum and gas producers and small business corporations.
  2. Dividend withholding tax (DWT) was introduced, effective from April 1 2012. Previously, a tax known as the secondary tax on companies (STC) was levied at a rate of 10%. The DWT applies to dividends declared by South African-resident companies. Certain dividends are exempt from the withholding tax, such as dividends received by South African-resident companies and public benefit organizations. A decreased rate may apply under a double tax treaty.
  3. Interest withholding tax at a rate of 15%, which took effect on March 1 2015, applies to non-residents only. Certain interest income is exempt from this withholding tax, such as interest with respect to government debt instruments, listed debt instruments and debt instruments owed by banks. A reduced rate may apply under a double tax treaty.
  4. The 15% rate applies to royalties paid (or due and payable) on or after January 1 2015. This withholding tax applies to non-residents only. A reduced rate may apply under a double tax treaty.
  5. Services withholding tax at a rate of 15%, which will take effect on January 1 2017, will apply only to payments made to non-residents with respect to South African-source services not otherwise subject to normal tax after taking into account tax treaties.

Source: EY 2016 Worldwide Corporate Tax Guide