South Africa: Guidance on definition of “associated enterprises” under transfer pricing rules

Definition of “associated enterprise” related to cross-border transactions under the transfer pricing rules

Transfer pricing rules

The South African Revenue Service (SARS) on 14 October 2022 published a draft interpretation note on the definition of the term “associated enterprise” related to cross-border transactions under the transfer pricing rules.


National Treasury in 2019 proposed that the application of the South African transfer pricing rules be expanded by also including cross-border transactions that are carried on between “associated enterprises.” Following several postponements, the effective date for the proposed amendment was set for 1 January 2023 and the new rules would then apply to years of assessment commencing on or after that date. 

KPMG observation

The term “associated enterprises” is very broad and requires further definition in terms of local law. In addition, the OECD Model Tax Convention is designed to assist countries entering into agreements for the avoidance of double taxation by giving examples and suggestions, which require specification in each individual case. The articles of the Model Tax Convention, including Article 9, which deals with potential double taxation arising from transfer pricing matters, are not intended to be universally applicable. Therefore, countries other than South Africa that also rely on the “associated enterprises” concept have defined this further in their local law.

What’s next

As a draft interpretation note has already been released, it is expected that the proposed amendment to section 31 will be implemented as is. The Taxation Laws Amendment Bill, 2022, is expected to be published in the coming days.

Read an October 2022 report [PDF 271 KB] prepared by the KPMG member firm in South Africa


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