Africa has historically been a place where foreigners come and take; take people, take land, take resources and opportunity. Unfortunately, even as we progress into modern times, Africa is still a place where foreigners come and take advantage. Tax avoidance is not unique to Africa or other developing countries, but African nations recently banded together to take a stand against tax avoidance by foreign nationals and domestics as part of a worldwide new global tax agenda action plan set out by the Organisation for Economic Cooperation and Development (hereinafter \u201cOECD\u201d).<\/p>\n
The OECD\u2019s 15-point action plan was recently considered in a historic meeting by the council of the African Tax Administration Forum (hereinafter \u201cATAF\u201d).\u00a0 The ATAF joined twenty-nine African nations to deliberate the action plan assuring Africa\u2019s participation in the new rules of the global tax agenda.<\/p>\n
High on the list of matters discussed by at the ATAF conference was the developing nations’ struggle with base erosion and profit shifting (hereinafter \u201cBEPS\u201d). BEPS is a practice usually associated with large, multinational corporations where taxable income is shifted to other low-tax locations thus eroding the taxable base of the country. This practice has resulted in overall lower prices for natural resource in Africa paired with tax incentives to multinational corporations working in those industries. The result is that African nations are robbed of good prices for their resource wealth, and taxes they would have been able to collect if profit shifting had not been occurring, thus keeping them as developing nations always reaching for developed status.<\/p>\n
South Africa, in particular, has come up with three measures to defend against foreign tax evasion. The first, transfer pricing rules to ensure that any foreign debt is introduced at a reasonable interest rate and that the capitalisation of the local company does not rely too heavily on that debt. Second, an interest withholding tax that will impose a tax rate of 15-percent on non-resident South African earnings. Finally, a new rule applying to interest earned by non-residents where the debtor in the arrangement is a connect person to the creditor and where the non-resident creditor is not subject to South African tax on the interest earned. There may be a specific exemption for the non-resident depending on the double tax agreements between their country and South Africa.<\/p>\n
If you are involved with a multinational corporation with ties to Africa or specifically South Africa and would like more information about these changes and their coming impact, then please contact us<\/a> for help navigating the ever-changing domestic and global tax agenda.<\/p>\n SHARE THIS:<\/span><\/p>\n","protected":false},"excerpt":{"rendered":" Africa has historically been a place where foreigners come and take; take people, take land, take resources and opportunity. Unfortunately, even as we progress into modern times, Africa is still a place where foreigners come and take advantage. Tax avoidance is not unique to Africa or other developing countries, but African nations recently banded together … Continue reading Africa Takes a Stand Against Base Erosion and Profit Sharing.<\/span>