The availability of treaty relief for secondary transfer pricing adjustments taking the form of a deemed distribution of an asset in specie in South Africa
type: CreativeWork
description: The number of MNEs have increased substantially in recent years, putting a strain on international tax rules which have not developed at the same pace. Many of these MNEs have kept their tax bill at a minimum by shifting profits to low tax jurisdictions by using transfer prices that do not accord with economic reality. In response hereto, many tax jurisdictions have implemented domestic anti-avoidance legislation to assist tax authorities in curbing tax avoidance resulting from the manipulation of transfer prices. SA is an example of such a country. These anti-avoidance provisions typically involve a primary and secondary adjustment. The primary adjustment requires that an adjustment be made to the transfer price used by the MNE in the event that the said price does not reflect an arm's length price. The secondary adjustment concerns itself with making the actual allocation of funds consistent with the primary adjustment by deeming there to be another transaction, i.e. the secondary transaction. In SA, this secondary adjustment takes the form of a deemed distribution of an asset in specie in the case of residents who are companies. As such, this secondary transaction (i.e. the deemed dividend) is subject to Dividends Tax in SA levied at the domestic rate. This study considered whether such a deemed dividend will qualify for treaty relief in the form of the reduced rate provided for by Article 10 of the OECD MTC and UN MTC. In making this analysis, three main issues where specifically considered, namely (i) whether the SA company paying the Dividends Tax will have access to treaty relief in cases where Dividends Tax is not listed as a covered tax in the relevant tax treaty, (ii) whether a deemed dividend under a secondary adjustment in terms of SA domestic law falls within the dividend definition contained in Article 10.3 of the OECD and UN MTC, and finally (iii) whether the relevant deemed dividend can be regarded as 'paid' for purposes of Article 10.1 and 10.2 of t…
abstract: The number of MNEs have increased substantially in recent years, putting a strain on international tax rules which have not developed at the same pace. Many of these MNEs have kept their tax bill at a minimum by shifting profits to low tax jurisdictions by using transfer prices that do not accord with economic reality. In response hereto, many tax jurisdictions have implemented domestic anti-avoidance legislation to assist tax authorities in curbing tax avoidance resulting from the manipulation of transfer prices. SA is an example of such a country. These anti-avoidance provisions typically involve a primary and secondary adjustment. The primary adjustment requires that an adjustment be made to the transfer price used by the MNE in the event that the said price does not reflect an arm's length price. The secondary adjustment concerns itself with making the actual allocation of funds consistent with the primary adjustment by deeming there to be another transaction, i.e. the secondary transaction. In SA, this secondary adjustment takes the form of a deemed distribution of an asset in specie in the case of residents who are companies. As such, this secondary transaction (i.e. the deemed dividend) is subject to Dividends Tax in SA levied at the domestic rate. This study considered whether such a deemed dividend will qualify for treaty relief in the form of the reduced rate provided for by Article 10 of the OECD MTC and UN MTC. In making this analysis, three main issues where specifically considered, namely (i) whether the SA company paying the Dividends Tax will have access to treaty relief in cases where Dividends Tax is not listed as a covered tax in the relevant tax treaty, (ii) whether a deemed dividend under a secondary adjustment in terms of SA domestic law falls within the dividend definition contained in Article 10.3 of the OECD and UN MTC, and finally (iii) whether the relevant deemed dividend can be regarded as 'paid' for purposes of Article 10.1 and 10.2 of t…
author: Strauss, Carien
language: eng
date published: 2017
date modified: 2026-07-22T22:22:58Z
provider: University of Cape Town
publisher: Networked Digital Library of Theses and Dissertations
type: WebPage
source organization: Department of Finance and Tax

PropertyValue
property ID: Handle
value: http://hdl.handle.net/11427/25465