A comparative analysis: South African transfer pricing regime in relation to other developing African countries

Abstract

The desire by African countries to grow their economies has led to majority of the developing African countries opening their trading boarders to the world with an objective to attract foreign investments. In recent years Africa has seen major investments by multinational corporations that resulted in growth in international transactions (i.e. the cross-border intercompany transactions) by the affected multinational corporations. These investments have also presented the continent with challenges relating to transfer pricing manipulations by the same multinational corporations. The tax base erosion in developing countries has led to a rise in the number of regulations implemented by different countries which are aimed at dealing with transfer pricing as over the past years, transfer pricing has become increasingly important to those companies with cross-border intercompany transactions due to the complexities of transfer pricing regulations. The continuous changing transfer pricing environment also makes it challenging for multinational companies to comply with the requirements and manage their transfer pricing position. The laws and regulations on transfer prices need to be designed in such a way that they do not result in the continent losing on foreign direct investment which the countries need. The aim of this dissertation is to provide the comparative analysis on the adequacy and the readiness of the South African transfer pricing regime in relation to other developing African countries with the focus on detail analysis of the current SA transfer pricing regime, the challenges currently being faced by the country in relation to other countries and lastly provide the recommendation that can be applied to address these challenges