South Africa: Country-by-country (CbC) reporting – final regulations issued

South Africa

Report from Emily Muyaa, IBFD Managing Senior, Sub-Saharan Africa

Country-by-country (CbC) reporting – final regulations issued

The final regulations on CbC reporting were issued via Government Gazette No.R. 1598 of 23 December 2016 (the Regulations). The Regulations specify the changes to the CbC reporting standard for multinational enterprises (MNEs) required for South Africa’s circumstances.
The Regulations provide the following, among other things:
(i) Each ultimate parent entity of an MNE Group that is tax resident in South Africa must file a CbC report containing:

aggregate information relating to the amount of revenue, profit (loss) before income tax, income tax paid, income tax accrued, stated capital, accumulated earnings, number of employees, and tangible assets other than cash or cash equivalents with regard to each jurisdiction in which the MNE Group operates; and

an identification of each constituent entity of the MNE Group setting out the jurisdiction of tax residence of such constituent entity, and where different from such jurisdiction of tax residence, the jurisdiction under the laws of which such constituent entity is organized, and the nature of the main business activity(ies) of such constituent entity.
In addition, the CbC report must contain the information set out in, and apply the definitions and instructions contained in, the standard template set out in “Annex III to Chapter V” of the final report on Action 13: Transfer Pricing Documentation and Country-by-Country Reporting of the OECD/G20 Base Erosion and Profit Shifting Project.
(ii) A constituent entity which is not the ultimate parent entity of an MNE Group must file a CbC report if the following criteria are satisfied:
(a)
the entity is tax resident in South Africa; and
(b)
one of the following conditions applies:

the ultimate parent entity of the MNE Group is not obligated to file a CbC report in its jurisdiction of tax residence; or

the jurisdiction in which the ultimate parent entity is resident for tax purposes has a current International Agreement, as defined, to which South Africa is a party but does not have a Qualifying Competent Authority Agreement, as defined, in effect to which South Africa is a party by the time specified for filing the CbC report for the reporting fiscal year; or

there has been a systemic failure of the jurisdiction of tax residence of the ultimate parent entity that has been notified by SARS to the constituent entity that is tax resident in South Africa.
Where there are more than one constituent entities of the same MNE Group that are tax resident in South Africa and one or more of the conditions set out in (b) above apply, the MNE Group may designate one of such constituent entities to file the CbC report and to notify SARS accordingly.
(iii) Notwithstanding (ii) above, when one or more of the conditions set out under point (b) thereof apply, a constituent entity which is not the ultimate parent entity is not required to file a CbC report with respect to any reporting fiscal year if:

the MNE Group of which it is a constituent entity has made available a conforming CbC report with respect to such fiscal year through a surrogate parent entity that files that CbC report with the tax authority of its jurisdiction of tax residence no later than 12 months after the last day of the reporting fiscal year, as defined, of the MNE Group; and

certain conditions are satisfied including the following:

the jurisdiction of tax residence of the surrogate parent entity requires filing of CbC reports conforming to the requirements in (i) above;

the jurisdiction of tax residence of the surrogate parent entity has a Qualifying Competent Authority Agreement, as defined, in effect to which South Africa is a party by the time specified by the Regulations for filing the CbC report; and

the jurisdiction of tax residence of the surrogate parent entity has not notified SARS of a systemic failure.
Notes:
1. The threshold for filing a CbC report is total consolidated group revenue of more than ZAR 10 billion (or, in cases contemplated under (ii) above, EUR 750 million) during the fiscal year immediately preceding the reporting fiscal year as reflected in the group’s consolidated financial statements for such preceding fiscal year.
2. The CbC report must be filed with the SARS no later than 12 months after the last day of the reporting fiscal year of the MNE Group.
3. These Regulations are effective for reporting fiscal years beginning on or after 1 January 2016.

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