Harmful Tax Practices – 2017 Peer Review Reports on the Exchange of Information on Tax Rulings

South Africa

South Africa has met all aspects of the terms of reference (ToR) for the calendar year 2017 (year in review) and no recommendations are made.

South Africa can legally issue one type of rulings within the scope of the transparency framework.

In practice, South Africa has issued one past ruling; and for the period 1 April 2016 -31 December 2016 and for the year in review, South Africa issued no future rulings within the scope of the transparency framework.

No peer input was received in respect of the exchanges of information on rulings received from South Africa.

Introduction

1217.  This peer review covers South Africa’s implementation of the BEPS Action 5 transparency framework for the year 2017. The report has four parts, each relating to a key part of the ToR. Each part is discussed in turn. A summary of recommendations is included at the end of this report.

A. The information gathering process

1218.  South Africa can legally issue one type of rulings within the scope of the transparency framework: rulings related to preferential regimes.1 In South Africa, rulings are issued by the rulings division, a centralised department within the legal advisory division of the South African Revenue Service (“SARS”). Anonymised copies of rulings are published on the South African Revenue Service website.2

Past rulings (ToR I.4.1.1, I.4.1.2, I.4.2.1, I.4.2.2)

1219.  For South Africa, past rulings are any tax rulings within scope that are issued either: (i) on or after 1 January 2014 but before 1 April 2016; or (ii) on or after 1 January 2010 but before 1 January 2014, provided they were still in effect as at 1 January 2014.

1220.  In the prior year peer review report, it was determined that South Africa’s undertakings to identify past rulings and all potential exchange jurisdictions were sufficient to meet the minimum standard. South Africa’s implementation in this regard remains unchanged, and therefore continues to meet the minimum standard.

Future rulings (ToR I.4.1.1, I.4.1.2, I.4.2.1)

1221.  For South Africa, future rulings are any tax rulings within scope that are issued on or after 1 April 2016.

1222.  In the prior year peer review report, it was determined that South Africa’s undertakings to identify future rulings and all potential exchange jurisdictions were sufficient to meet the minimum standards. South Africa’s implementation in this regard continues to meet the minimum standard.

Review and supervision mechanism (ToR I.4.3)

1223.  In the prior year peer review report, it was determined that the South African Tax Administration’s review and supervision mechanisms were sufficient to meet the minimum standard. The South African Tax Administration’s implementation in this regard continues to meet the minimum standard.

Conclusion on section A

1224.  South Africa has met all of the ToR for the information gathering process and no recommendations are made.

B. The exchange of information

Legal basis for spontaneous exchange of information (ToR II.5.1, II.5.2)

1225.  South Africa has the necessary domestic legal basis to exchange information spontaneously. South Africa notes that there are no legal or practical impediments that prevent the spontaneous exchange of information on rulings as contemplated in the Action 5 minimum standard.

1226.  South Africa is a party to international agreements permitting spontaneous exchange of information, including (i) the Multilateral Convention on Mutual Administrative Assistance in Tax Matters: Amended by the 2010 Protocol (OECD/Council of Europe, 2011) (“the Convention”) and (ii) double tax agreements in force with 67 jurisdictions.3

Completion and exchange of templates (ToR II.5.3, II.5.4, II.5.5, II.5.6, II.5.7)

1227.  In the prior year peer review report, it was determined that the South Africa’s completion and exchange of templates were sufficient to meet the minimum standard. South Africa’ implementation in this regard remains unchanged, and therefore continues to meet the minimum standard.

1228.  South Africa indicates that the FHTP internal suggested guide will be utilised for completing the summary section of Annex C of the 2015 Action 5 Report (OECD, 2015) for information exchanged under the transparency framework and it will be incorporated into South Africa’s processes in the future. In addition, focus will be placed on the facts of the transaction to ensure that it is adequately explained and the summary will also be reviewed by a group executive for quality purposes.

1229.  For the year in review, the timeliness of exchanges is as follows:

 

Past rulings in the scope of the transparency framework	Number of exchanges transmitted by 31 December 2017	Delayed exchanges
		Number of exchanges not transmitted by 31 December 2017	Reasons for the delays	Any other comments
	1	N/A	N/A	Exchange transmitted to country that is a new Inclusive Framework member.
Future rulings in the scope of the transparency framework	Number of exchanges transmitted within three months of the information becoming available to the competent authority or immediately after legal impediments have been lifted	Delayed exchanges
		Number of exchanges transmitted later than three months of the information on rulings becoming available to the competent authority	Reasons for the delays	Any other comments
	N/A	N/A	N/A
Total	1	N/A

 

Follow up requests received for exchange of the ruling	Number	Average time to provide response	Number of requests not answered
	0	N/A	N/A

Conclusion on section B

1230.  South Africa has met all of the ToR for the exchange of information process and no recommendations are made.

C. Statistics (ToR IV)

1231.  The statistics for the year in review are as follows:

 

Category of ruling	Number of exchanges	Jurisdictions exchanged with
Rulings related to preferential regimes	Included in de minimis	N/A
Cross-border unilateral advance pricing agreements (APAs) and any other cross-border unilateral tax rulings (such as an advance tax ruling) covering transfer pricing or the application of transfer pricing principles	N/A	N/A
Cross-border rulings providing for a unilateral downward adjustment to the taxpayer’s taxable profits that is not directly reflected in the taxpayer’s financial / commercial accounts	N/A	N/A
Permanent establishment rulings	N/A	N/A
Related party conduit rulings	N/A	N/A
De minimis rule	1	N/A
IP regimes: total exchanges on taxpayers benefitting from the third category of IP assets, new entrants benefitting from grandfathered IP regimes; and taxpayers making use of the option to treat the nexus ratio as a rebuttable presumption	N/A	N/A
Total	1

D. Matters related to intellectual property regimes (ToR I.4.1.3)

1232.  South Africa does not offer an intellectual property regime for which transparency requirements under the Action 5 Report (OECD, 2015) were imposed.

Summary of recommendations on implementation of the transparency framework

 

Aspect of implementation of the transparency framework that should be improved	Recommendation for improvement
	No recommendations are made.

References

OECD (2017), BEPS Action 5 on Harmful Tax Practices – Terms of Reference and Methodology for the Conduct of the Peer Reviews of the Action 5 Transparency Framework, OECD/G20 Base Erosion and Profit Shifting Project, OECD, Paris. www.oecd.org/tax/beps/beps-action-5-harmful-tax-practices-peer-review-transparencyframework.pdf.

OECD (2015), Countering Harmful Tax Practices More Effectively, Taking into Account Transparency and Substance, Action 5 - 2015 Final Report, OECD/G20 Base Erosion and Profit Shifting Project, OECD Publishing, Paris. https://doi.org/10.1787/9789264241190-en.

OECD/Council of Europe (2011), The Multilateral Convention on Mutual Administrative Assistance in Tax Matters: Amended by the 2010 Protocol, OECD Publishing, Paris. http://dx.doi.org/10.1787/9789264115606-en.

Notes

← 1.  With respect to the following preferential regimes: 1) Shipping regime and 2) Headquarters regime.

← 2.  Available at: www.sars.gov.za (accessed 20 November 2018).

← 3.  Parties to the Multilateral Convention are available here: www.oecd.org/tax/exchange-of-tax-information/convention-on-mutual-administrative-assistance-in-tax-matters.htm. South Africa also has bilateral agreements with Algeria, Australia, Austria, Belarus, Belgium, Botswana, Brazil, Bulgaria, Cameroon, Canada, Chile, China (People’s Republic of), Croatia, Cyprus, Czech Republic, Democratic Republic of Congo, Denmark, Egypt, Ethiopia, Finland, France, Ghana, Greece, Hong Kong, Hungary, India, Indonesia, Iran, Ireland, Italy, Japan, Kenya, Korea, Lesotho, Luxembourg, Malaysia, Malta, Mauritius, Mexico, Mozambique, Namibia, Netherlands, New Zealand, Nigeria, Norway, Oman, Pakistan, Poland, Portugal, Qatar, Rwanda, Samoa, Saudi Arabia, Seychelles, Singapore, Slovak Republic, Spain, Swaziland, Sweden, Tanzania, Turkey, Uganda, Ukraine, United Arab Emirates, United Kingdom, United States and Zimbabwe.

Note by Turkey: The information in this document with reference to “Cyprus” relates to the southern part of the Island. There is no single authority representing both Turkish and Greek Cypriot people on the Island. Turkey recognises the Turkish Republic of Northern Cyprus (TRNC). Until a lasting and equitable solution is found within the context of the United Nations, Turkey shall preserve its position concerning the “Cyprus issue”.

Note by all the European Union Member States of the OECD and the European Union. The Republic of Cyprus is recognised by all members of the United Nations with the exception of Turkey. The information in this document relates to the area under the effective control of the Government of the Republic of Cyprus.