On 8 June 2015, the Organisation for Economic Co-operation and Development ("OECD") released a Country-by-Country Reporting Implementation Package developed under the OECD's base erosion and profit shifting ("BEPS") Action Plan 13: Re-examine Transfer Pricing Documentation.

BEPS was identified as a risk to tax revenues, tax sovereignty and the tax fairness of all countries by the OECD in 2013. A 15-point Action Plan was developed to address BEPS and to ensure that profits are taxed where the economic activities generating the profits are performed and where value is created.

The purpose of the OECD's Action Plan 13 was to re-assess transfer pricing documentation requirements with the purpose of obtaining information from taxpayers so as to enable tax administrations to identify transfer pricing risks. The OECD's recommendation under Action Plan 13 was that all countries should adopt a standardised approach to transfer pricing documentation which follows a three-tiered structure consisting of a master file, a local file, and country-by-country report.

In South Africa ("SA") the tax review committee appointed by the Minister of Finance to make recommendations for possible tax reforms in SA, headed by Judge Dennis Davis (the "Davis Committee") is of the view that the OECD's recommendation under Action Plan 13 i.e. that countries should adopt a standardised approach to transfer pricing documentation, should also be adopted in SA.

Accordingly, in terms of the OECD's Country-by-Country Reporting Implementation Package the ultimate parent entity of a large multinational business with a group turnover of over R1 billion in SA will be required to provide aggregate information annually to the South African Revenue Service ("SARS") in each jurisdiction where they do business.

The information to be provided to SARS, will include the global allocation of income and taxes paid, indicators of the location of economic activity within the group, as well as information about which entities do business in a particular jurisdiction and the business activities each entity engages in.

In addition, the Davis Committee recommends that the country-by-country report for SA should contain additional transactional data regarding related party interest payments, royalty payments and especially related party service fees, so that SARS may perform risk assessments where it is difficult to obtain information on the operations of a multinational business.

The OECD's Country-by-Country Reporting Implementation Package also contains three Model Competent Authority Agreements to facilitate the exchange of country-by-country reports among tax administrations.  This will ensure that all tax administrations obtain a complete understanding of the way multinational enterprises structure their operations and it will also enhance transparency by providing tax administrations with information to assess high-level transfer pricing and other BEPS-related risks.

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