guiding businesses on how it assesses intra-group loans – warning that it is taking a stern position on companies that break related business principles to get a better tax outcome.
SARS said that issues around intra-group loans could arise where a non-resident company directly or indirectly funds a South African company – especially when they have ‘thin capitalisation’: in other words, they have too much debt against their equity. The arm’s length principle denotes that transactions should be valued as if they had been carried out between unrelated parties, each acting in their own best interest.
SARS said it would act sternly to protect fiscus if the parties are found to have acted at variance with this principle. Transfer pricing on its own is not good or bad; it is simply a necessity, given that parties transact with each other. In a tax context,
Source: News Formal (newsformal.com)
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