In brief
Proposed amendments to the Customs Rules (Rules) under sections 40(3), 41(4), and 120 of the Customs and Excise Act were published for public comment by the South African Revenue Service (SARS) in January 2024. The proposed Rules are intended to formalise the process for reporting transfer pricing adjustments impacting customs values declared to SARS at the time of importation. Public comments on the proposed rules close on 9 February 2024.
In more detail
On 19 January 2024, the South African Revenue Service (SARS) published the proposed amendments to the Customs Rules (Rules) under sections 40(3), 41(4), and 120 of the Customs and Excise Act, 1964 (Act) for public comment. The proposed Rules aim to formalise the process for reporting transfer pricing adjustments (TP Adjustments) impacting customs values declared to SARS at the time of importation. TP Adjustments and the obligations related thereto from a customs perspective are only partially regulated in South Africa.
Currently, importers are required to report TP Adjustments to SARS within one month of receipt of an amended invoice or certificate and a corresponding credit note or debit note (i.e., supporting documents) from the exporter. In addition, the importer is required, in terms of section 41 of the Act, to submit these supporting documents to SARS when reporting the adjustment. In practice, this is usually supplemented with transfer pricing documentation and any further documentation provided subsequent to a request by SARS; however, this reporting process is not legislated. The current practice involves a two-step process, whereby importers first disclose the information that is required in terms of the Act and produce any further documentation only after being specifically requested to do so by SARS.
On 19 January 2024, the South African Revenue Service (SARS) published the proposed amendments to the Customs Rules (Rules) under sections 40(3), 41(4), and 120 of the Customs and Excise Act, 1964 (Act) for public comment. The proposed Rules aim to formalise the process for reporting transfer pricing adjustments (TP Adjustments) impacting customs values declared to SARS at the time of importation. TP Adjustments and the obligations related thereto from a customs perspective are only partially regulated in South Africa.
Currently, importers are required to report TP Adjustments to SARS within one month of receipt of an amended invoice or certificate and a corresponding credit note or debit note (i.e., supporting documents) from the exporter. In addition, the importer is required, in terms of section 41 of the Act, to submit these supporting documents to SARS when reporting the adjustment. In practice, this is usually supplemented with transfer pricing documentation and any further documentation provided subsequent to a request by SARS; however, this reporting process is not legislated. The current practice involves a two-step process, whereby importers first disclose the information that is required in terms of the Act and produce any further documentation only after being specifically requested to do so by SARS.
The proposed amendments require that importers notify SARS of the TP Adjustment and simultaneously provide a wide range of documentation specified in the proposed Rules, at the first instance. SARS may nevertheless request any further documentation from the importer to sufficiently justify the TP adjustment.
However, the proposed Rules place a burden on importers to collate all the documents set out in the Rules and submit them to SARS, within the prescribed period of one month. Furthermore, the documentation required in the proposed Rules is extensive in comparison to what is submitted in practice in the current dispensation and may not be relevant to all importers.
SARS has also proposed that TP Adjustments could be reported to SARS via a designated email address or by visiting a customs office. We believe that SARS could simplify the reporting process even further by enabling submissions via the SARS e-Filing platform to assist taxpayers with continued compliance and the timely filing of their reports.
If implemented, enterprises that conduct cross-border trade in South Africa would be impacted by these proposed amendments. The amendments would place an onerous reporting process on such enterprises, costing them time, money, and possibly the confidentiality of their cross-border agreements. The amendments would be especially impactful for multinational enterprises, but they would also have repercussions for local entities that import or export goods into South Africa. We therefore suggest that any enterprises that might be affected partake in the public commentary process and ardently monitor their possible enactment. Public comments were initially due on 9 February 2024; however, SARS has extended the deadline for submission to 23 February 2024. It is imperative that any entities that may potentially be impacted by the proposed Rules take advantage of this opportunity to raise their concerns. We have begun addressing the concerns outlined above, and we encourage any interested parties to reach out to us to endorse or expand on these concerns.
This article was written with the assistance of Gabriel Rybko and Landise Banzana, Candidate Attorneys in the Tax Practice, Johannesburg.
