Transfer Pricing in South Africa: Constitutional or Unconstitutional?

Abstract

South Africa is part of the Commonwealth of Nations family of countries. The Commonwealth makes up a large part of the taxpaying nations in the world. This paper questions the constitutionality of South Africa's transfer pricing provision: that the tax authority can exercise a discretion to impose a tax charge retrospectively. This provision appears to fly in the face of key provisions of the South African Constitution of 1996. The paper touches on these issues and publishes the tax authority practice note. This paper was handed out to delegates at full-day transfer pricing workshops held in 2007 and hosted by the International Tax Institute.

Keywords: transfer pricing, South African Constitution, Commonwealth of Nations

JEL Classification: K10, K33, K34