In December 2021 SARS released a document setting out a proposed model for establishing an Advanced Pricing Agreement Program (“APA program”) in South Africa combined with draft legislation specific thereto.

In this regard SARS had previously issued a draft discussion paper on the introduction of an APA program in 2020.

The fundamental objective of implementing an APA program, other than looking to align with international developments, is to provide clarity and certainty for taxpayers around their obligations.

In the document SARS clearly states its biggest challenge in implementing such a program is the scarcity of transfer pricing expertise in South Africa and that they will require time and resources to develop such within the transfer pricing unit at SARS in order to enable the establishment of an appropriate APA program.

The intention initially will be to run a pilot APA project as soon as the legislative framework is in place.

The intention of this will be to assist the SARS APA unit to learn from other jurisdictions and develop the capacity needed.

The proposed process model envisages the following:

  • APA pre-application
  • APA application
  • APA processing
  • APA negotiations
  • APA finalisation
  • APA implementation and monitoring
  • APA termination/amendment/extension

It is intended that specific administrative aspects of the APA will be managed by way of Public Notice utilising the Government Gazette process and will cover:

  • Relevant factors to be considered in determining the most appropriate TP method
  • Setting the parameters in terms of which the competent authority may enter into an APA
  • Which persons are eligible to apply
  • Questions of relevant fees
  • The minimum value of affected transactions in order to qualify for an APA
  • Procedures and Guidelines for the implementation and operation of the APA process

John Jones

Director, Johannesburg

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