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When to prepare transfer-pricing information for SARS
When must a company prepare transfer-pricing information for SARS?
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Direct answer
Prepare transfer-pricing information as soon as a company has cross-border related-party transactions, rather than waiting for a SARS query or the ITR14 filing deadline. Notice 1334 prescribes records for persons with potentially affected transactions within its scope, using section 31 terminology. The exact documentation and reporting obligations depend on current rules, the parties, transaction type, group size, thresholds and relevant tax period. A completed intercompany invoice is not proof that the price is arm’s length.
The first step is a complete transaction map. Then gather agreements, invoices, financial data and the operational evidence that explains what each party actually did, used and assumed. A specialist should assess the resulting file against the current South African transfer-pricing and reporting requirements.
What this means in practice
Cross-border related-party dealings can include more than obvious management fees. Common examples are loans, guarantees, royalties, software charges, procurement services, sales commissions, distribution margins, cost-sharing arrangements, seconded employees and transfers of goods. A finance team that looks only for invoices labelled “intercompany” can miss important transactions.
Transfer-pricing preparation is difficult to reconstruct later because operational information fades. A local business may know it paid a foreign parent a service fee, but not have a signed agreement, work log, allocation key or evidence of benefit received. The file should be assembled while staff can explain the business model and provide data.
The ITR14 guide is an important return-completion source, but it is not a pricing manual. SARS can request evidence supporting return disclosures. It is safer to prepare a contemporaneous file that explains the legal relationship, functions, risks, assets, pricing method and financial outcome rather than relying on a narrative written only after a SARS audit starts.
Step-by-step
- Build a related-party register.
List every foreign related party and the relationship to the South African company. Include direct and indirect group entities, permanent establishments, branches and relevant connected persons. Update the register for acquisitions, disposals, restructurings and new agreements.
- Map each transaction.
For each category, record counterparty, date, currency, amount, agreement, invoice pattern, payment terms, taxes withheld, VAT treatment and ledger accounts. Reconcile the map to the annual financial statements and general ledger.
- Gather the legal and operational facts.
Retain signed agreements, amendments, board approvals, emails, invoices and payment proof. Document who performs functions, owns or uses assets, bears risks and makes key decisions. This operational evidence supports the pricing analysis.
- Assemble financial support.
Obtain segment accounts, cost pools, allocation keys, budgets, margin calculations, comparable data and foreign tax information. If the price is calculated using a group policy, keep the policy and an explanation of how it was applied locally.
- Obtain current specialist advice.
Ask a transfer-pricing adviser to assess documentation, disclosures, thresholds, reporting forms and the pricing method for the relevant period. Notice 1334 has specific record conditions and transaction thresholds, so assess its application from the notice and current law. Do not copy a threshold or deadline from an old return because rules can change.
- Finalise the ITR14 consistently.
Ensure that return answers, financial statements, tax computation and transfer-pricing file do not contradict one another. Record management approval and maintain a list of assumptions for future periods.
Documents and records to keep
Keep group charts, related-party registers, agreements, invoices, payment evidence and all pricing calculations. Retain functional analyses, cost allocations, comparable data, financial statements, tax returns and correspondence with the parent group. Add the completed ITR14 workpapers, specialist memoranda and internal approvals.
Important limits and exceptions
This guide does not provide a transfer-pricing opinion, select a pricing method or determine whether a particular amount is arm’s length. It does not set current thresholds, country-by-country reporting obligations or filing dates. Those items must be checked for the applicable period.
Domestic related-party transactions, customs valuation, withholding taxes and VAT can involve overlapping but distinct rules. Do not assume that a customs value or a contract price settles the transfer-pricing question.
When to get tailored advice
Get specialist advice before signing a significant cross-border intercompany agreement, making a major related-party payment, changing a policy, filing an ITR14 with international disclosures or responding to SARS. Advice is urgent if the group lacks agreements or documentation for existing arrangements.
TaxProof can help create the transaction register and evidence checklist. We cannot prepare a defensible transfer-pricing conclusion without specialist analysis and complete group data.