South Africa Issues Draft CbC Regulations

The South African Revenue Service (SARS) has issued draft regulations for the purpose of specifying a new country-by-country (CbC) reporting standard for multinational enterprises (MNEs).

Legislative amendments to the Tax Administration Act, 2011, were effected during 2015 in order to implement CbC reporting in South Africa. They implement the OECD’s recommendations under its base erosion and profit shifting Action 13.

A new definition of an “international tax standard” was inserted in section 1 of the Act, which includes the CbC Reporting Standard for Multinational Enterprises, subject to such changes as specified by the Minister of Finance in subsequent regulations. The draft regulations closely follow the OECD’s model legislation related to CbC reporting, including a requirement that MNEs provide governments with information on their global allocation of the income, economic activity, and taxes paid among countries.

South Africa signed the Multilateral Competent Authority Agreement on the Exchange of CbC Reports on January 27, 2016. The CbC reporting period under the draft regulations starts for reporting years of assessment commencing on or after January 1, 2016. The first CbC reports will be required to be filed with SARS from December 2017.

A South African MNE’s CbC report filed with SARS will be based on the transfer pricing records it should already maintain. A draft public notice on the keeping of transfer pricing records was published for public comment on December 15, 2015.

South African parent companies will be required to file a CbC report if their multinational group’s net turnover is ZAR10bn (USD680.5m) or more (qualifying MNE Group). The CbC report must be filed no later than 12 months after the last day of the MNE Group’s reporting year of assessment.

The CbC report should include details such as aggregate information relating to the amount of revenue, profit (loss) before income tax, income tax paid, income tax accrued, stated capital, accumulated earnings, number of employees, and tangible assets other than cash and cash equivalents, with regard to each jurisdiction in which the qualifying MNE Group operates.

Comments on the draft regulations should be forwarded to SARS by May 3, 2016.