South Africa: Reducing The Cost Of Transfer Pricing Compliance For MNEs

Last Updated: 19 June 2018
Article by Okkie Kellerman

Most Read Contributor in South Africa, July 2019

Many countries have become more focused on combating tax avoidance. As such, transfer pricing compliance has become much more burdensome due to substantial documentation requirements and multiple filing deadlines. Multinationals ("MNEs") have to take action to control their transfer pricing risks, but the cost of doing so could substantially increase.

Before base erosion and profit shifting ("BEPS"), transfer pricing compliance was mostly local, requiring local transfer pricing documentation that focused only on the local transfer pricing position. In South Africa, MNEs would submit their corporate income tax returns, disclosing only the financial data of their locally affected transactions without the need to submit any transfer pricing policies to the South African Revenue Service ("SARS").

However, post-BEPS, various levels of transfer pricing documentation and filing requirements were introduced to disclose tax sensitive data, increasing the cost burden of multinationals to meet these requirement, such as:

  • the country-by-country report ("CbCR"), disclosing tax data for each jurisdiction in which a MNE operates;
  • the master file, providing a detailed value chain analysis of the group;
  • the local file, analysing the local function performed, risks assumed and assets employed;
  • local documentation requirements. In this regard, South African MNEs are also required to comply with the complex transfer pricing record-keeping requirement issued by SARS; and
  • the filings of the local corporate tax return, disclosing the tax data of the local company as well as its inter-company transactions.

All layers of documentation are to be submitted to revenue authorities, providing them with a complete picture of the MNE's value chain. As such, it is important that these layers of documentation are aligned and consistent, all disclosing the same information. Filing of transfer pricing documentation must be synchronised across the group, increasing the work load of the MNE's tax team and increasing its compliance costs. Imagine the increased work load of a tax team within a multinational group operating in 15 countries through 28 legal entities, with filing requirement covering 1 March to 31 December.

It is now important to:

  • consider using analytic software to synchronise the analysis of financial and tax data;
  • determine the group's tax compliance by considering corporate international tax, value-added tax, employees' tax, transfer pricing documentation, CbCR; and
  • manage in-house IT and human resources to assist the tax function and compliance.

To ensure that financial and tax data are synchronised, it is preferable to use one source to produce both sets of data. If not, it is important that data is collected in a way to ensure that the same information is disclosed where multiple disclosures are done. In other words, the information on the CbCR must be the same as the information disclosed on the corporate tax return. This should assist in limiting additional queries from revenue authorities as well as the need to reconcile information after it has been disclosed to revenue authorities. This may require:

  • a proper value gain and transaction analysis;
  • a comparison of both the tax accounting and the CbCR to the International Financial Reporting Standards accounting requirement; and
  • a comparison of the group's performance to that of its competitors.

The tax compliance approach must clearly identify the controversy instruments that will be used to resolve tax disputes as well as a clear stance on when litigation will be considered to resolve tax disputes.

A global approach to transfer pricing documentation is also a must. Once the information has been synchronised, the transfer pricing documents can be produced globally to meet all the group's compliance requirements. This central control will improve the efficiency in how documentation is prepared and submitted.

In addition to these documentation and filing challenges, the challenges from within a MNE are multiple and must be managed and coordinated to be in control of all transfer pricing risks. The cost of compliance also includes the time and effort of in-house tax and finance teams. Effective transfer pricing compliance will require:

  • succession planning to ensure continuity to deal with queries and tax audits effectively;
  • education of the tax team and proper knowledge management;
  • interaction with finance and IT departments;
  • tax governance procedures; and
  • a proper tax strategy.

A successful transfer pricing function should start with the development and maintenance of transfer pricing documentation and end with the drafting and implementation of the legal agreements support the pricing policies.

It is also important to standardise how reports are presented to ensure that all companies in the group follow the same approach. Also, the processes followed in filing tax returns and documentation need to be standardised across the group.

MNEs can organise their transfer pricing compliance team in one of the following three ways:

  1. use a central team that is fully responsible putting the transfer pricing policy together, making sure that it is applied throughout the organisation and that all transfer pricing filings are done with local participation limited to support only.
  2. have a smaller central team, only responsible for setting the transfer pricing policy and ensuring it is applied across the group with all transfer pricing reports and filings done by local teams.
  3. use a service centre to perform all of the actual work with a central team doing quality control and compliance with the support of a local team. Depending the model used, it can be decided what functions to outsource and whether software should be used.

It's important for MNEs to consider where they are on their transfer pricing compliance journey; whether they have organised their tax team to ensure that documentation is prepared and submitted timeously; and if they have considered use of software to prepare transfer pricing documentation or if it will be outsourced.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions