Faculty of Commerce, Law and Management (ETDs)

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Subject: search.filters.subject.Anti-avoidance

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    An analysis of where the transfer pricing rules and the controlled foreign company rules interact: application to intra-group loans
    (University of the Witwatersrand, Johannesburg Date of Issue *, 2022) Kamoetie, Diwa; Kolitz, Maeve
    It has become increasingly important for South African tax residents to correctly reflect an arm’s length price for which they transfer goods or services, and in the case of intellectual property, grant a use, right of use or permission to use of the intellectual property, to non- residents, as this may attract adverse tax consequences for failure to do so. This is of particular importance when funding cross-border operations. Furthermore, the ownership structure of the non-resident is also of importance, as the ownership structure adopted by the non-resident may have South African income tax consequences, for the South African tax resident, if that non-resident is a connected person to the South African tax resident,1 the non- resident is a controlled foreign company as defined in section 9D of the Income Tax Act, or both instances are applicable. Therefore, the controlled foreign company rules and the transfer pricing rules must be considered,2 amongst other factors, when engaging in cross- border tax structuring to correctly structure these transactions This research report critically examines the South African transfer pricing rules and South African controlled foreign company rules and discusses the overlap of the two sets of rules. This analysis goes further in identifying the means to manage transfer pricing risk using a controlled foreign company in relation to a South African taxpayer, with a specific focus on intro-group loans
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    The arm’s length pricing for intra-group services – transfer pricing
    (2017) Lee, Yi Ying
    The purpose of this research report is to identify any improvements that can be made to the South African transfer pricing legislation for intra-group services. South Africa’s transfer pricing legislation for intra-group services will be compared to Aligning Transfer Pricing Outcomes with Value Creation, Action 8-10, 2015 Final Reports, OECD/G20 Base Erosion and Profit Shifting Project (‘BEPS Action Plan’) released by the Organisation for Economic Co-operation and Development (‘OECD’). The Action 10 of the BEPS Action Plan introduces a simplified transfer pricing approach for low value-adding intra-group services. The simplified approach aims to reduce base erosion payments through excessive management fees and head office expenses (OECD, 2015:141). According to Verlinden and Katz (2015:1): ‘… the simplified approach lowers the burden on multinational enterprise groups to demonstrate the beneficial nature of the low value-adding activities for other MNE group members; and allows for an elective approach for reducing the administration involved in the pricing of low value-adding services. The OECD is achieving an appropriate balance between theoretical sophistication and practical application that is commensurate with the tax at stake in the countries paying and receiving the charges … .’ This approach will benefit tax authorities with limited resources in performing transfer pricing audits enabling them to verify the arm’s length nature within the intra-group services charge (Watson, 2015:8). Key words: Anti-avoidance, BEPS Action Plan, Transfer Pricing, Arm’s Length Method, Arm’s Length Price, Intra-Group Services, Low Value-Adding Intra-Group Services, Comparable Uncontrolled Price Method, Resale Price Method, Cost Plus Method, Transactional Net Margin Method, OECD Guidelines, OECD.