South Africa transfer pricing documentation guide
March 03, 2008
Jacques van Rhyn, of PwC in South Africa, describes the policy of the South African Revenue Service (SARS) on transfer pricing documentation
Although there is no explicit statutory requirements to prepare and maintain transfer pricing documentation, it is in the taxpayer’s best interest to document how transfer prices have been determined, since adequate documentation is the best way to demonstrate that transfer prices are consistent with the arm’s length principle, as required by section 31 of the South African Income Tax Act No 58 of 1962 (section 31).
A taxpayer electing not to prepare transfer pricing documentation is at risk on two counts. Firstly, it is more likely that the South African Revenue Services (commissioner) will examine a taxpayer’s transfer pricing in detail if the taxpayer has not prepared proper documentation. Secondly, if the commissioner, as a result of this examination, substitutes an alternative arm’s length amount for the one adopted by the taxpayer, the lack of adequate documentation will make it difficult for the taxpayer to rebut that substitution, either directly to the commissioner or in the courts.
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