ARTICLE · 06 NOVEMBER 2013

Extended Transfer Pricing Relief

KPMG, South Africa

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The Taxation Laws Amendment Bill, 2013 issued on 24 October 2013 (following the draft Bill issued 4 July 2013) proposes transfer pricing relief for loans with equity like features which have been extended by a South African company to its non-resident subsidiary, provided certain requirements are met.

South AfricaTax

Natasha Vaidanis

Roy Naudé

Deborah Tickle

Yasmeen Suliman

The Taxation Laws Amendment Bill, 2013 issued on 24 October 2013 (following the draft Bill issued 4 July 2013) proposes transfer pricing relief for loans with equity like features which have been extended by a South African company to its non-resident subsidiary, provided certain requirements are met.

Generally the transfer pricing provisions apply to any loan granted by a South African tax resident to a foreign connected party regardless of the substantive character of the loan. However, South African companies often capitalise their offshore operations with loans which resemble equity like characteristics in that the loan bears very little or no yield and are deeply subordinated with long-term or indefinite maturity dates.

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