What is it?
Corporates and connected persons such as groups of companies, trusts, partnerships or natural persons and Multi-National Entities (MNEs) present some complex compliance risks.
To close the gaps and address the mismatches between the tax systems of multiple countries the Base Erosion and Profit Shifting (BEPS) Action Plan was adopted by the OECD and G20 countries, including South Africa, in 2013.
The OECD / G20 BEPS project provided the ambit for the development of Country-by-Country (CbC) reporting. CbC reporting requires MNE Groups to report on their operations in every country that they operate in. These reports will enable revenue authorities to assess transfer pricing risks and other BEPS related risks with respect to the MNE Groups operating in their countries.
How does it work?
On 23 December 2016 (see Notice R.1598)
regulations specifying the changes to the CbC Reporting Standard for MNE Groups specifically required for South Africa’s circumstances, were published under the Tax Administration Act, 2011
. The South African CbC Regulations were closely modelled on the legislation related to CbC reporting published in the BEPS Action 13 (2015) Final Report. In addition, a public notice (see Public Notice 1117)
under section 25 of the Tax Administration Act requires the filing of the CbC Reports, master files and/or local files. An extension of the initial deadline for filing these reports were given in Public Notice 1308
of 8 December 2017. SARS will be able to receive and exchange information provided in the CbC Reports, master files and/or local files with other jurisdictions.
Who is required to report on their operations?
- The Ultimate Parent Entity (UPE), resident in South Africa, of an MNE Group with a total consolidated group revenue of R10 billion or more during the Fiscal Year immediately preceding the Reporting Fiscal Year, as reflected in its Consolidated Financial Statements for such preceding Fiscal Year, is required to file a CbC Report (CbC01), master file and local file
- Any MNE Entity with potentially affected transactions for the year of assessment, without offsetting any potentially affected transactions against one another, that exceeds or is reasonably expected to exceed R100 million, is required to file a local file and may also be required to file a master file.
What is the due date for submitting returns?
A UPE or other MNE entity that must file a CbC Report, master file and local file must file no later than 12 months after the last day of the Reporting Fiscal Year of the MNE Group. An MNE entity that must only file a local file (and master file) must file no later than 12 months after its year of assessment.
Notifications in terms of Article 3 of the CbC regulations for filing the CbC reports must be provided to SARS no later than 12 months after the last day of the Reporting Fiscal Year of the MNE Group. The Country-by-Country email notifications are no longer required, as this has been incorporated into the ITR14 return. Taxpayers must complete the required information in the ITR14 return for the CbC notification to SARS.
How to submit a return?
The CbC01 form is now available for electronic submission on the SARS eFiling platform using the CbC link. Kindly note that for the purpose of submitting the CbC01 form, currently SARS does not support submissions for CbC using any mobile devices. As mentioned the reporting requirements are stipulated in the BRS which also contains the requirements pertaining to the CbC01 form, master file and local file.
The master file and local file will have limitations in term of the size to be transmitted. Each file should not exceed 5MB and combined files will be limited to 100MB per submission. All documents will be converted to PDF when they are transmitted.
How will the exchange of information take place?
The CbC Report will be saved on the SARS system for SARS use and transmission to other tax jurisdictions in terms of the Multilateral Competent Authority Agreement (MCAA) and bilateral Competent Authority Agreement. See the list of signatories to the MCAA.
On request from other tax jurisdictions, components of the master file and local file will be exchanged with such tax jurisdictions under treaty.