In October 2016 South African Revenue Services (SARS) issued regulations obligating taxpayers who met certain criteria to maintain and retain specific documentation, as detailed in the regulations, with regards to cross border connected party transactions.

Following on from this, they have issued two further documents.

The first is a draft notice which will oblige taxpayers to submit Country by Country (CbC) reports as well as Master files and Local files prepared in line with the guidelines provided by the Organisation for Economic Cooperation and Development (OECD)

The second is an External Business Requirements Specification (BRS) document.

What is important for taxpayers to realise is it would appear that SARS is going to seek to apply these requirements retrospectively to tax years of assessment commencing 1 January 2016.

The document sets out the specifics relating to CbC reporting and the mechanisms that will be used in order to facilitate this process which will be via a Financial Data Reporting profile linked to E-filing.

In summary South African taxpayers who have entered into cross border transactions with connected parties and the value of these cross border transactions exceeds R 100 000 000, in aggregate, will be obliged to submit to SARS a Master File and Local File. These submissions must take place within twelve months of the taxpayers financial year end.

In the case of CbC reporting taxpayers, with consolidated group revenue of greater than R 10 billion or Euro 750 000 000 are obliged to submit a CbC report as well as a Master File and Local File.

In addition even where local subsidiaries of international groups do not have a direct reporting requirement in terms of CbC reporting it must be kept in mind that they will have a secondary notification obligation to notify SARS of the identity and tax residence of the groups ultimate reporting entity.

For taxpayers with year ends at 31 December 2016 the reporting timeframes are short and need to be dealt with as a matter of extreme urgency.

John Jones

Director | Corporate and International Tax, Johannesburg

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