Category: CHAPTER III – General Provisions (ITA)

Section 76J (ITA) – Processing of advance pricing agreement application

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76J       Processing of advance pricing agreement application

 

(1)     Once the Commissioner accepts the advance pricing agreement application, the Commissioner must process the application in accordance with the requirements as prescribed, by public notice, by the Commissioner.

 

(2)     The Commissioner must, in writing, inform the applicant at 90-day intervals, commencing on receipt of the advance pricing agreement application referred to in section 76F(1), of the progress made in processing the advance pricing agreement application, and must issue invoices for purposes of section 76D(2) with the progress reports.

 

(3)     Based on the information provided in the advance pricing agreement application, the Commissioner must prepare a preliminary advance pricing agreement containing such information as may be prescribed, by public notice, by the Commissioner.

 

(4)     In the case of a unilateral advance pricing agreement, the Commissioner must send the preliminary agreement to the applicant to accept or reject the agreement.

 

(5)     In the case of a DTA advance pricing agreement, the Commissioner must send the preliminary agreement to the competent authority of the other country, which will be party to an affected transaction in the agreement, for the competent authority to consider if it is in agreement with the position adopted in the agreement, after taking into account the agreement for the avoidance of double taxation with that country.

 

(6)     The Commissioner must, in writing, notify the applicant once subsection (5) has been complied with.

 

(7)     If the competent authority in subsection (5) agrees, in writing, to the position adopted in the preliminary agreement, the Commissioner must send the preliminary agreement to the applicant to accept or reject the agreement.

[Section 76J inserted by section 10 of Act 18 of 2023]

Section 76K (ITA) – Finalisation of advance pricing agreement

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76K      Finalisation of advance pricing agreement

(1)     If an applicant accepts the preliminary advance pricing agreement in terms of section 76J(4) or 76J(7), the applicant must sign the agreement and return it to the Commissioner.

(2)     At least two SARS officials delegated to do so, one of whom is the competent authority of the Republic in the case of a DTA advance pricing agreement, must sign the preliminary advance pricing agreement once subsection (1) has been complied with.

(3)     Once subsection (2) has been complied with, the Commissioner must send the advance pricing agreement to the applicant and, in the case of a DTA advance pricing agreement, also to the competent authority of the other country referred to in section 76J(5).

(4)     An advance pricing agreement will come into effect once subsections (1), (2) and (3) have been complied with.

(5)     The advance pricing agreement is applicable for up to a maximum of five consecutive years of assessment, commencing on the day after the end of the year of assessment in which the associated advance pricing agreement application is received by the Commissioner.

(6)     Based on a specific request by the applicant in an advance pricing agreement application, the Commissioner may allow the associated advance pricing agreement to be applicable for up to a maximum of three consecutive years of assessment, ending on the last day of the year of assessment in which the advance pricing agreement application is received by the Commissioner: Provided that the advance pricing agreement will not result in a cumulative decrease in taxable income or increase in assessed loss for the years of assessment.

(7)     The total duration in subsection (6) will be in addition to the total duration in subsection (5).

[Section 76K inserted by section 10 of Act 18 of 2023]

Section 76L (ITA) – Compliance report

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76L      Compliance report

 

(1)     An applicant that is party to an advance pricing agreement must submit a compliance report to the Commissioner for each of the years of assessment referred to in sections 76K(5) and 76M(3) by no later than the day by which the return for each year of assessment must be submitted.

 

(2)     The compliance report must be in the prescribed form and manner, and must include the following information—

 

(a)     Any changes to the information provided in the advance pricing agreement application subsequent to submitting the application;

 

(b)     details of an affected transaction in the advance pricing agreement that has been concluded or is in the process of being concluded; and

 

(c)     confirmation and a demonstration of compliance with the terms and conditions of the advance pricing agreement.

[Section 76L inserted by section 10 of Act 18 of 2023]

Section 76M (ITA) – Extension of advance pricing agreement

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76M     Extension of advance pricing agreement

 

(1)     The applicant that is party to an advance pricing agreement may, not less than 60 days before the end of the last of the years of assessment referred to in section 76K(5), request the Commissioner to extend the agreement.

 

(2)     The request under subsection (1) must be in the prescribed form and manner and must include the following information—

 

(a)     Any changes to the information provided in the advance pricing agreement application subsequent to submitting the application;

 

(b)     confirmation that all terms and conditions of the existing advance pricing agreement have been complied with; and

 

(c)     any changes that must be taken into account in the extended advance pricing agreement, such as economic, technical, product, industry or geographical developments.

 

(3)     The Commissioner may extend the advance pricing agreement, in writing, for a period that does not exceed three consecutive years of assessment, commencing on the day after the end of the last of the years of assessment referred to in section 76K(5).

 

(4)     Sections 76F, 76G, 76H, 76I, 76J and 76K apply with the necessary changes required for the extension of an advance pricing agreement.

 

(5)     The Commissioner may reject a request to extend an advance pricing agreement and may require the requestor to submit a new advance pricing agreement application.

[Section 76M inserted by section 10 of Act 18 of 2023]

Section 76N (ITA) – Termination of advance pricing agreement

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76N     Termination of advance pricing agreement


(1)     A party to an advance pricing agreement may choose to terminate the agreement prospectively by informing, in writing, the other parties to the agreement of the grounds for the termination.


(2)     The Commissioner may, in writing, terminate an advance pricing agreement prospectively if-


(a)     there is an amendment to the legislation on which the agreement is based, unless the general interpretation upon which the agreement was based is unaffected by the amendment;


(b)     there is a change to the agreement for the avoidance of double taxation on which the agreement is based, unless the general interpretation upon which the agreement was based is unaffected by the change; or


(c)     a court overturns or modifies an interpretation of the legislation on which the agreement is based, unless-


(i)      the judgment is under appeal;


(ii)     the judgment is fact-specific and the general interpretation upon which the agreement was based is unaffected; or


(iii)    the reference to the interpretation upon which the agreement was based was obiter dicta; or


(d)     the applicant that is party to the agreement failed to comply with the terms and conditions of the agreement.


(3)     The Commissioner may, in writing, terminate an advance pricing agreement retrospectively if-


(a)     it was issued in error, and if-


(i)      the applicant that is party to the advance pricing agreement has not yet commenced an affected transaction in the agreement or has not yet incurred significant costs in respect of the affected transaction;


(ii)     a person, other than the applicant that is party to the advance pricing agreement, will suffer a significant tax disadvantage if the agreement is not terminated; or


(iii)     the effect of the agreement will materially erode the tax base of the Republic;


(b)     any of the critical assumptions is breached and the breach is not remedied within a period acceptable to the Commissioner;


(c)     an affected transaction was carried out in a materially different manner from that disclosed in the advance pricing agreement application; or


(d)     there is fraud, misrepresentation or non-disclosure of a material fact by the applicant that is party to the advance pricing agreement.


(4)     A party to an advance pricing agreement must, in writing, inform other parties to the agreement within 30 days of becoming aware of a condition in subsection (2) or (3) that may result in the termination of the agreement.


(5)     A party that chooses to terminate an advance pricing agreement must first provide the other parties to the agreement with notice, in writing, of the proposed termination of the agreement, the grounds for the proposed termination and provide a reasonable opportunity to the other parties to make representations prior to the decision to terminate the agreement.


(6)     The Commissioner must, in writing, inform all parties to an advance pricing agreement of the effective date from which the agreement has been terminated.

[Section 76N inserted by section 10 of Act 18 of 2023]

Section 76E (ITA) – Pre-application consultation

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76E     Pre-application consultation

 

(1)     A prospective applicant must request a pre-application consultation meeting, in the prescribed form and manner.

 

(2)     The Commissioner must arrange a pre-application consultation meeting with the prospective applicant after receipt of a valid request under subsection (1).

 

(3)     The pre-application consultation meeting must-

 

(a)     identify the affected parties, the relationship between the parties, and their countries of residence;

 

(b)     discuss the most recent annual financial statements of the prospective applicant;

 

(c)     discuss the affected transaction that will form part of the advance pricing agreement;

 

(d)     discuss the most appropriate transfer pricing method to apply to the affected transaction;

 

(e)     in the case of a DTA advance pricing agreement, discuss if the prospective applicant or another affected party has consulted with the competent authority of the other country that will be party to an affected transaction;

 

(f)      discuss the applicable fees in section 76D; and

 

(g)     determine further information that may be required from the prospective applicant.

 

(4)     The Commissioner may notify the prospective applicant that the prospective applicant may submit an advance pricing agreement application after-

 

(a)     the pre-application consultation meeting; and

 

(b)     in the case of a potential DTA advance pricing agreement application, after consultation with the competent authority of the other country that will be party to an affected transaction.

[Section 76E inserted by section 10 of Act 18 of 2023]