Introduction of the term “associated enterprise” to the SA transfer pricing regime postponed

In terms of this change, cross-border transactions subjected to transfer pricing requirements will no longer be limited to those between connected persons, as it currently stands, but will include transactions entered into between associated enterprises. Given that the definition of an associated enterprise includes an enterprise which participates directly or indirectly in the management, control or capital of another enterprise, it extends further than the definition of connected persons.

Public commentators indicated that the new definition would require further elaboration and clarification before taking effect. A decision was made at the time to defer the amendment to 1 January 2022 to provide the South African Revenue Services (“SARS”) and taxpayers with more time to consider the interpretation of the term “associated enterprise”. With the implementation date around the corner, and in light of additional public commentary that the initial postponement does not give enough time for SARS to issue an interpretation note and engage with taxpayers, the implementation has been deferred further to 1 January 2023. The latter has been indicated in the draft response document on the 2021 draft tax bills (“the draft response document”), as issued by Treasury along with other MTBPS documents on 11 November 2021, which can be accessed here. 

It follows from the above that some relief are being provided to taxpayers which may fall within the transfer pricing net, as a result of them having cross-border transactions with associated enterprises (as opposed to connected persons in terms of the current regime), until 1 January 2023. This will allow for more certainty regarding the exact extent to which the net are being thrown wider, as many additional taxpayers would likely have to ensure that their cross-border transactions comply with transfer pricing requirements.

02/12/2021