SARS’ new DRAFT Mutual Agreement Procedure

SARS MAP Guide DRAFT 2018 Draft Guide on MAPs

CONTENTS

Preface…………………………………………………………………………………………………………………ii

Glossary ………………………………………………………………………………………………………………1

1. Background ……………………………………………………………………………………………….1

1.1 What is a mutual agreement procedure?………………………………………………………………………..2

1.2 Legal basis for mutual agreement procedure ………………………………………………………………….5

1.3 Multilateral Instrument………………………………………………………………………………………………….6

1.4 The role of a competent authority ………………………………………………………………………………….7

1.5 South Africa mutual agreement procedure profile and website………………………………………….7

2. In what instances would mutual agreement procedure apply? ……………………… 8

2.1 Taxation not in accordance with the Convention ……………………………………………………………..8

2.1.1 Dual residence ……………………………………………………………………………………………………………8

(a) Place of effective management……………………………………………………………………………………..8

(b) Mutual agreement ……………………………………………………………………………………………………….9

2.1.2 Withholding taxes withheld not in accordance with the relevant double taxation agreementA Double Taxation Agreement (DTA), also known as a Double Taxation Treaty (or a Tax Treaty), is an international tax treaty between two or more countries that aims to prevent individuals or businesses from being taxed twice on the same income. With globalisation and the increase in cross-border economic activities, DTAs have become essential tools for promoting trade, investment, and... ………………………………………………………………………………………………………………….9

2.1.3 Transfer pricingTransfer pricing is a fundamental concept in international taxation that defines the pricing methods and rules applied to transactions between related entities within a multinational enterprise (MNE). In the context of tax regulations, it governs how prices for goods, services, or intangibles (such as intellectual property) are set when these items are exchanged between different branches, subsidiaries, or affiliates of... mutual agreement procedure cases ……………………………………………………..10

2.2. Difficulties or doubts arising as to the interpretation or application of the Convention …………10

3. Circumstances in which a mutual agreement procedure request may be accepted or denied……………………………………………………………………………………11

3.1 No action by one or both of the jurisdictions results or will result in taxation not accordance with the Convention………………………………………………………………………………….11

3.2 Time limits for requesting a mutual agreement procedure ………………………………………………11

3.2.1 Time limitation in double taxationDouble Taxation occurs when the same income or financial transaction is taxed twice, typically in different jurisdictions. It can arise in two primary contexts: economic double taxation, where the same income is taxed twice in the hands of different taxpayers, and juridical double taxation, where the same taxpayer is taxed on the same income in more than one country. Double... agreements ………………………………………………………………11

3.2.2. Domestic tax lawTax laws form the backbone of any nation’s revenue system, setting the rules that govern how individuals and corporations contribute financially to support government functions. These laws define the types of taxes, the applicable rates, and the regulations regarding payment and compliance. They also outline the rights and obligations of taxpayers, ensuring a balanced and fair approach to funding public... (prescription – three-year period) ……………………………………………………….12

3.2.3 Extension of time under prescription…………………………………………………………………………….12

3.3 Objection, alternative dispute resolutions and audit settlements………………………………………13

3.4 Right to access the mutual agreement procedure when domestic or treaty-based anti-abuse rules have been applied ……………………………………………………………………………………14

4. Making a mutual agreement procedure request………………………………………….. 14

4.1 General mutual agreement procedure process ……………………………………………………………..14

4.2 Format of a mutual agreement procedure request …………………………………………………………15

4.3 Minimum information requirements………………………………………………………………………………16

4.4 Mutual agreement procedure request for multiple tax years and recurring issues………………18

4.5 Checklist before submitting a mutual agreement procedure request ………………………………..18

4.6 How to submit a mutual agreement procedure request…………………………………………………..18

4.7 Withdrawal of a mutual agreement procedure request……………………………………………………19

4.8 Use of information within a mutual agreement procedure process …………………………………..19

5. Concluding a mutual agreement procedure request …………………………………… 20

5.1 Objections not considered to be justified ………………………………………………………………………20

5.2 Notifying the taxpayer ………………………………………………………………………………………………..20

5.3 Providing relief ………………………………………………………………………………………………………….21

5.4 Secondary adjustments, withholding tax and repatriation on transfer pricingTransfer pricing is a fundamental concept in international taxation that defines the pricing methods and rules applied to transactions between related entities within a multinational enterprise (MNE). In the context of tax regulations, it governs how prices for goods, services, or intangibles (such as intellectual property) are set when these items are exchanged between different branches, subsidiaries, or affiliates of... adjustments…..22

5.5 Penalties and interest…………………………………………………………………………………………………22

6. Interaction with domestic law…………………………………………………………………….23

6.1 Suspension of payment pending mutual agreement procedure outcome ………………………….23

6.2 Mutual agreement procedure and assistance in collection of taxes ………………………………….23

7. Miscellaneous issues………………………………………………………………………………..23

7.1 Advance pricing arrangement programmes…………………………………………………………………..23

7.2 Issues related to self-initiated foreign adjustments…………………………………………………………23

7.3 Protective mutual agreement procedure filing ……………………………………………………………….24

7.4 South Africa’s position on mutual agreement procedure arbitration………………………………….24

7.5 Pension and annuities (RST01 and RST02 application forms) ………………………………………..24

7.6 Multilateral mutual agreement procedures…………………………………………………………………….25