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SARS Issues Guide On Headquarter Company Taxation

by Lorys Charalambous, Tax-News.com, Cyprus

23 February 2016


The South African Revenue Service (SARS) has issued an interpretation note that provides guidance on the application of the Income Tax Act to headquarter companies.

The note briefly discusses the provisions of the Act that were initially effective for years of assessment commencing on or after January 1, 2011, and provide special tax relief for headquarter companies. There are also specific anti-avoidance rules designed to prevent misuse or abuse of those provisions.

It is explained that, while headquarter companies are subject to tax in the same way as any other resident company, they are entitled to certain relief from corporate income tax, capital gains tax, and dividends tax that is not available to resident companies that are not headquarter companies.

For example, they are exempt from corporate income tax on foreign dividends received, and may disregard the capital gain or capital loss on the disposal of equity shares in a foreign company. In addition, a foreign person receiving interest or royalties from a headquarter company will, under specified circumstances, be exempt from withholding tax on those receipts.

Headquarter companies are excluded from South Africa's controlled foreign company attribution rules under the Act. Transfer pricing rules are also relaxed, but are accompanied by the ring-fencing of incurred interest and royalties.

TAGS: capital gains tax (CGT) | South Africa | tax | business | royalties | revenue guidance | law | corporation tax | tax authority | corporate headquarters | controlled foreign corporations (CFC) | legislation | transfer pricing | withholding tax | tax breaks | dividends | Africa | Tax

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