New Guidance in South Africa on the Definition of “Associated Enterprises” in Connection with the Transfer Pricing Rules

Abstract

This article deals with a draft interpretation note entitled Definition of “Associated Enterprise” issued by the South African Revenue Service on 14 October 2022. The draft note provides guidance on the interpretation and application of the definition of “associated enterprise” which is to be included in section 31(1) of the Income Tax Law. The purpose of this inclusion is to bring the legislation in line with international standards and to address a potential anomaly and reduction in the tax base created by the exclusion of “associated enterprises” from section 31. A de facto approach is adopted in regard to the concepts “manage”, “control” and “capital”. The potential consequences of this are briefly dealt with.