South Africa
Report from our correspondent Lutando Mvovo, South Africa
Revenue Service issues interpretation note on headquarter companies
On 28 November 2018, the South African Revenue Service (SARS) published Interpretation Note 87 (Issue 2) (IN 87) on headquarter companies. The purpose of IN 87 is to provide guidance and clarity on the interpretation and application of section 9I of the Income Tax Act, 58 of 1962 (ITA), which deals with headquarter companies.
IN 87 also discusses other provisions of the ITA that provide special tax relief for headquarter companies, as well as the specific anti-avoidance rules that are designed to prevent misuse or abuse of those provisions.
IN 87 addresses the following, among other things:
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the definition of “headquarter company” and qualifying requirements for a headquarter company;
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relief from income tax and capital gains tax;
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dividends and foreign dividends received by or accrued to a headquarter company and related exemptions from income tax;
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transfer pricing rules in relation to headquarter companies; and
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ring fencing of interest and royalties incurred by headquarter companies.
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The information contained in IN 87 is based on the income tax and tax administration legislation (as amended) as at the time of publishing and includes the following:
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the Taxation Laws Amendment Act, 17 of 2017, which was promulgated on 18 December 2017;
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the Tax Administration Laws Amendment Act, 13 of 2017, which was promulgated on 18 December 2017; and
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the Rates and Monetary Amounts and Amendment of Revenue Laws Bill of 2018.
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