SOUTH AFRICA Law and Practice Contributed by: Magda Snyckers and Cameron Nathaniel, ENS
8. Audit Cycles 8.1 Regular Routine Audit Cycle Companies are required to be audited on an annual basis. 9. BEPS 9.1 Adoption of BEPS Recommendations South Africa is a member of the OECD’s Inclusive Framework on BEPS. In particular, the following apply to South Africa: • signatory to the MLI, which it ratified in 2022; • enacted domestic regulations to regulate transfer pricing documentation requirements similar to what is set out in Chapter V of the OECD’s 2017 Transfer Pricing Guidelines (ie, BEPS Action 13); and • introduced provisions limiting interest deductions or exemptions where the income is not subject to tax in South Africa. 9.2 Government Policy and Objectives Approach South Africa has published the legislation for its Glob - al Minimum Tax, enacting the Global Minimum Tax Act, 2024 and the Global Minimum Tax Administration Act, 2024 in late 2024, with the rules applying to fiscal years starting from 1 January 2024, aligning with the OECD’s Pillar Two initiative to ensure large Multina - tional Enterprises pay a minimum 15% tax. SARS has issued guidance, with eFiling functionality for report - ing expected in March 2026 for most affected entities. 9.3 International Tax See 9.1 Adoption of BEPS Recommendations and 9.2 Government Policy and Objectives Approach . 9.4 Competitive Tax Policy Objectives There is no applicable information in this jurisdiction. 9.5 The Competitive Tax System Although the international headquarter company regime is aimed at positioning South Africa as a favourable jurisdiction to invest into Africa, its applica - tion is limited. While withholding tax relief is provided,
ject to tax in South Africa in the hands of the declaring company. 6.4 Taxation of Intangibles Developed by Local Corporations See 4.4 Transfer Pricing Issues for Inbound Inves- tors . 6.5 Controlled Foreign Corporation-Type Rules South Africa has complex CFC rules. A foreign branch will not qualify as a CFC but is regarded as part of the same taxpayer as its head office. 6.6 The Substance of Non-Local Affiliates SARS may question the tax residence of foreign affili - ates if they do not have sufficient substance. 6.7 The Sale of Shares in Non-Local Affiliates The disposal of shares in non-resident companies may be subject to income tax or CGT. If CGT applies, a participation exemption exists if 10% or more of the equity shares and votes have been held for at least 18 months and the shares are sold for market value to an unrelated non-resident which is not a CFC of a South African resident. All transactions are subject to the general anti-avoid - ance rules (GAAR) contained in the Act. A transaction will fall foul of the GAAR if it gives rise to a tax benefit, its sole or main purpose is to derive a tax benefit, and it would not normally be employed for bona fide business purposes, lacks commercial substance, or creates rights and obligations that would not normally be created between persons dealing at arm’s length. A “tax benefit” includes any avoidance, postpone - ment or reduction of any liability for tax, duty or levy imposed by the Act or by any other Act administered by the Commissioner for SARS. 7. Anti-Avoidance Provisions 7.1 Overarching Provisions
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