[World Tax News] South Africa brings TP Rules for intra-group loans and more

Editorial Team – [2023] 146 taxmann.com 493 (Article)

World Tax News providaes a weekly snippet of tax news from around the globe. Here is a glimpse of the tax happening in the world this week.

1. South Africa releases guidance on Arm’s Length Pricing rules for intra-group loans

The South African Revenue Service (SARS) has issued an ‘Interpretation Note 127’ titled “Determination of the Taxable Income of Certain Persons from International Transactions: Intra-Group Loans”. The note explains how the agency will compute arm’s length price for intra-group loans and the penalties for not adhering to arm’s length pricing for debt and debt costs.

Transfer pricing refers to the cost of exchanging goods or services between parties. The transaction cost can be problematic when parties manipulate the prices to gain an unfair tax advantage, particularly in transactions between related parties across borders, as it can be used to exploit different tax laws and result in less revenue for the affected jurisdictions.

The note provides clarity on the meaning of connected person, associate enterprise, the applicability of the arm’s length principle, etc. The South African Revenue Service has clarified that the guidance and examples provided in the interpretation note are not exhaustive and not covering every issue that might arise. Each case will be decided on its own merits, considering its specific facts and circumstances.

The note also provides guidance on the consequences for a taxpayer if the amount of debt, the cost of debt, or both are not at arm’s length.

Source: Interpretation Note

2. US State of Nebraska announced “Historic Tax Relief Bills”

The Governor of the US State of Nebraska has revealed the “Historic Tax Relief Bills,” which include two bills aiming to speed up tax cuts that legislators passed during the previous legislative session.

Legislative Bill (LB) 804 proposes to decrease the top corporate income tax rate to 5.84% on all taxable income above $ 1,00,000 for taxable years beginning or deemed to begin on or after 01-01-2023.

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