South Africa issues interpretative note on the definition of “related entity” for transfer pricing purposes

The South African Revenue Service (SARS) has issued Interpretation Note 128, which sets out the guidelines and requirements for a company to be considered a “related entity” in relation to transfer pricing as defined in section 31(1) of the Income Tax Act 58.

Specifically, Interpretation Note 128 includes the following aspects:

• The definition of “affected operation” and its relationship with related persons and entities;
• Direct or indirect participation in the management of the companies;
• Direct or indirect participation in the control of the companies; and
• Direct or indirect participation in the capital of the companies.

Summary: The South African Revenue Service (SARS) has issued Interpretation Note 128, which sets out the guidelines and requirements for a company to be considered a “related entity”.

Bahamas publishes guide to new economic substance rules

The Bahamian government has established new requirements for business entities to support the economic substance of companies, including guidance notes to update the Bahamian regulatory framework to bring its regulations in line with international standards in relation to the economic substance of companies.

Specifically, the rules apply to companies operating in various sectors, such as (i) financial, (ii) distribution, (iii) services, (iv) parent companies, and (v) intellectual property, among others.

In this sense, companies operating in sectors included in the new guidelines for substance analysis must perform the following actions:

• Prepare an operational risk model related to the economic substance,
• Reporting to the relevant tax authorities,
• Retain all types of information supporting the economic substance of the companies, and
• Analyze whether the requirements for economic substance are indeed met.

Summary: The Bahamian government has established new requirements for business entities to support the economic substance of companies.

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