Sars set to implement long-awaited APA system, creating more taxation certainty for multinationals

The South African Revenue Service (Sars) is moving ahead with plans to implement an advanced pricing agreement (APA) system this year.

It has been recruiting specialists in the area of transfer pricing, reports Business Day, and is expected to take APA applications from multinational companies from as early as June.

National Treasury released draft legislation for a proposed APA programme back in 2023.

An advanced pricing agreement helps create tax clarity and certainty for multinational businesses, entailing a contract between a taxpayer and a tax authority specifying the pricing method to apply to company transactions, in advance.

Sars told Business Day hat, so far, six specialist roles have been filled and the unit will be strengthened with additional staff as it expands.

Stephen Grootes interviews Keith Engel, CEO of the South African Institute of Taxation (SAIT).

With Engel describing transfer pricing as one of the most complicated areas of tax law for both taxpayers and the revenue service, it becomes clear why Sars needs a team of experts to draw up and implement the APA system.

"This is the price that's set between a domestic and a foreign company, both of which are part of a general group. And one thing tax people have trouble setting is what is a realistic price. Determining this... is extremely difficult, and that's why it takes so much effort to clean it up on both sides."

What Sars is trying to do here, is actually lend a helping hand to the affected taxpayer, Engel says: "It's a way of setting a price so that there isn't a dispute later."

"Sars has worked for a few years to set up the rules, and now they're making this determined effort to actually put people in there and get the job done."

To hear more detail on this complicated aspect of taxation, listen to the interview audio at the top of the article