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South Africa: Penalties for non-compliance; country-by-country reporting, transfer pricing returns

South Africa: Non-compliance; CbC reporting

The South African Revenue Service (SARS) on 11 May 2018 issued a notice concerning penalties that may be imposed on multinational entity (MNE) groups or their South African companies, for failing to comply with the rules for preparing and filing country-by-country (CbC) reports, Master files, and Local files (i.e., transfer pricing returns). The guidance provides for a fixed amount of penalties.


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The requirement to file CbC reports and transfer pricing returns applies for some taxpayers for financial years as early as those beginning on or after 1 January 2016. Returns are due within 12 months from the end of the relevant financial year (the first due date, as extended by SARS, was 28 February 2018). 

The penalties for non-compliance effectively apply to taxpayers that are the “ultimate parent entity” of an MNE group required to file a CbC report in South Africa, but also apply to South African taxpayers that may not be the ultimate parent entity of a MNE group but that have a submission or filing obligation in South Africa (for example, because South Africa and the country where the MNE’s ultimate parent entity is a tax resident have not entered into or activated an exchange of information agreement).

KPMG observation

The requirements relating to the preparation of transfer pricing documentation are complicated, and with the new penalty regime, non-compliance with the rules may have implications on the cash flow of certain taxpayers. It is expected that SARS may release an additional or an updated public notice on penalties that would apply to taxpayers that are not required to submit CbC reports in South Africa, but that have or are expected to have transactions in excess of R100 million and thus are required to submit a Master file and Local file in South Africa. The first due date for submission of the Master file and Local file is 30 September 2018.


Read a May 2018 report [PDF 85 KB] prepared by the KPMG member firm in South Africa

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