The risk of transfer pricing audits is growing for multinationals
Locally, SARS is looking for ways to increase revenue without raising taxes, while internationally there is a push for more transparent record-keeping by multinationals
One area where the government can collect large amounts of revenue without having to raise taxes is transfer pricing audits. The South African Revenue Service (SARS), through its transfer pricing unit, has already upped its audits of multinational companies in recent years, resulting in transfer pricing adjustments running into billions of rand in additional income tax. A transfer price is the price of goods and services charged between companies within the same group of companies when they engage in cross-border transactions. Statistics from global tax and advisory firm EY show that in 30 cases over three years up to 2014, SARS made transfer pricing adjustments of more than R20bn, with an income tax impact of R5bn. One of the issues facing SARS during audits is insufficient information and a lack of proper record-keeping by multinationals of their cross-border transactions. In line with international developments, notably the action plans by the Organisation for Economic Co-operati...
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