In a letter dated 21 August the South African Revenue Service (Sars) informed external stakeholders of the “Request for Information: Retroactive Transfer Pricing Adjustments”. According to the letter, Sars has embarked on a Transfer Pricing and Customs initiative to establish that all legal requirements in terms of the Customs and Excise Act (“the Act”) are correctly observed by taxpayers. A risk that has been identified is the non-declaration of year-end retroactive transfer pricing adjustments between related parties. The primary basis for Customs Valuation is the “transaction value”, which is defined as “the price actually paid or payable for goods sold for export to South Africa” provided that certain conditions are adhered to, in terms of Section 66(1) of the Act, adjusted in terms of Section 67 of the Act. One of the elements of Section 66(1) of the Act is the price review clause, which is subject to review at the end of a given period. Consequently retroactive transfer pricing year-end adjustments fall into this category. External stakeholders are requested to respond to the following questions to enable Sars to verify if the consideration of retroactive Transfer Pricing adjustments were taken into account with regards to the Customs Valuation: (i) Has the company made retroactive transfer pricing adjustments in the last five years of assessment? (ii) Is a value determination number in place? (iii) If yes, please supply the value determination number. (iv) Were the retroactive transfer pricing adjustments taken into account? Reply to the above enquiries within fourteen business days of date of this letter.
