Introduction

The South African Revenue Service (SARS) published a public notice on the submission of country-by-country (CbC) report, master file and local file. The public notice is dated 20 October 2017 and depending on certain criteria will be applicable for periods starting on or after 1 January 2016 or 1 October 2016.

Submission of a CbC report, master file and local file

A return is required to be submitted by a South African taxpayer in respect of a CbC report, a master file and a local file, if the following criteria are met:

  • The entity is considered to be an ultimate parent entity as defined in the South African CbC Regulations (No R. 1598, dated 23 December 2016); or
  • The entity is obliged to file the CbC Report in South Africa due to one of the following reasons:
    • The ultimate parent entity is not required to submit a CbC Report, and has not assigned a surrogate parent entity to file the CbC Report on behalf of the Group;
    • Automatic exchange relationship of qualifying competent authority agreement (QCAA) between South Africa and the relevant country is not activated by the time of filing the CbC Report;
    • There is no QCAA with the relevant jurisdiction and no international tax agreement (or it is not in force by the time of filing the CbC Report) allowing for automatic exchange of CbC Reports;
    • There has been a systemic failure, and the South African subsidiary has been informed by the tax administration of its need to submit.

It must be noted that the requirement to file a CbC report, a master file and a local file for the above-mentioned scenarios will be applicable for periods starting on or after 1 January 2016.

Submission of a master file and a local file

A return is required to be submitted by a South African taxpayer in respect of a master file and a local file, if the following criteria are met:

  • The entity is not an ultimate parent entity for CbC reporting purposes, and it is not obliged to file CbC report in South Africa. If it is, please refer to section “Submission of CbC Report, master file and local file”;
  • If the aggregate of a person’s potentially affected transactions (cross-border inter-company transactions, subject to the arm’s length principle test) for the year of assessment (without offsetting any transactions) exceeds or is reasonably expected to exceed ZAR100 million.

It must be noted that the requirement to file a master file and a local file for the above mentioned scenario will be applicable for periods starting on or after 1 October 2016.

Business requirements specification (BRS)

The public notice must be interpreted together with the CbC and Financial Data Reporting external business requirement specification schema, which provides information that needs to be included in the CbC Report, master file and local file. The final version (version 2.2) was published on 29 September 2017 and can be accessed here.

In addition, SARS has developed a website on CbC financial data reporting. At the time of preparing this alert, SARS noted that the CbC report, which needs to be filed in the CbC01 form, will have to be submitted electronically on the SARS eFiling platform using the CbC link, which is still in development and will only be available on the eFiling platform by mid-December 2017.

Next steps

We would be happy to have discussions regarding this public notice and how it might affect your company.

For more information, please contact: