South Africans who think that their tax burden is going to decrease because country-by-country ("CbC") reporting does not apply to their company should think again!
In addition to the recently released draft notice requiring the submission of CbC reports, master file and local file returns, the South African Revenue Service ("SARS") has recently issued the External Business Requirements Specification ("BRS") document, setting out CbC and Financial Data Reporting ("FDR") requirements.
South Africa's master file and local file requirements are in line with the Organisation for Economic Cooperation and Development's ("OECD's") requirements and South African taxpayers will now be obliged to submit transfer pricing-related returns.
The filing obligation detailed in the draft notice appears to apply retrospectively for years commencing on or after 1 January 2016. Consequently, qualifying taxpayers who have December year-ends may be expected to submit not only their first CbC report, but also master file and local file returns by 31 December 2017.
Even though these transfer pricing returns may not form part of the annual income tax return, it is probable that the due dates for all the returns (CbC reports, master file and local file returns) will coincide.
Although the BRS does not confirm the filing thresholds referred to in the draft notice, it is likely that:
- South African tax residents with a total consolidated group revenue in excess of ZAR10-billion/EUR750-million will be required to submit a CbC report, master file and local file return within 12 months of the end of its reporting fiscal year; and
- South African tax residents with an aggregate of potentially affected transactions for the year of assessment exceeding ZAR100-million will be required to submit only a master file and local file return within 12 months from the date on which its financial year ends.
The submission of CbC reports, master file and local file returns will be electronic, via a FDR system to be accessed through the SARS e-filing platform.
CbC reports will be standardised as a CbC01 form in order to meet the specifications of the OECD's CbC XML Schema. Currently, the BRS does not specify any form for notifying SARS of the identity of the reporting entity of an MNE.
The master and local file returns will require taxpayers to upload their master file and local file documentation on the FDR website, which will be hosted via SARS e-filing. Whether this will entail the uploading of the actual documentation or only specific information it is yet to be confirmed as SARS has not released a specific format of these returns.
Sharing of information
The information submitted in the CbC report will be exchanged automatically between SARS and those countries that recently signed the Multilateral Competent Authority Agreement as well as those countries with which South Africa has entered into an intergovernmental agreement for the purposes of the automatic exchange of information.
The master file information will, however, only be made available to other tax administrations in terms of the exchange of information rules and then only "on request". The local file information will only be made available by SARS to other tax administrations under "exceptional circumstances".
With only five months left before the submission of the first CbC report, master file and local file returns, this leaves taxpayers with very little time to gather the required information and to manage the possible risks in submitting such returns.
This article was reviewed by Okkie Kellerman, an executive
in ENSafrica's tax department.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.