Transfer Pricing Policy Amendments in South Africa

September 11, 2023

The South African Revenue Service Customs Office targeted the impact of year-end Transfer Pricing adjustments on the value of imported goods. In that regard, such adjustments must be previously notified under the provisions of the Excise and Customs Act to avoid penalties. 

SARS Role 

The South African Customs Authority is responsible for ensuring that the value of imported goods accurately reflects all taxable cost elements. The main basis for the customs valuation of imported goods is the “transaction value,” which is defined as “the price actually paid or payable for goods sold for export in the Republic.” 


Multinationals that make year-end Transfer Pricing adjustments to align the profit margins earned with an Arm’s Length target range must disclose this in their income tax return for the respective year of assessment.   

Thereafter this disclosure, multinationals are often overwhelmed by SARS requests for more information on these adjustments. MNEs must ensure that the declared transaction value is not unduly influenced by the relationship between subsidiaries. In other words, the circumstances surrounding the sale between the related buyer and seller must satisfy the Arm’s Length Principle. 

Section 41 (4) of the Excise and Customs Act 

Section 41(4) of the Act requires that SARS be previously notified of any adjustments made in terms of repricing clauses in an applicable Transfer Pricing Policy. 

A year-end adjustment performed for tax purposes without an actual invoice price adjustment may be perceived by Customs as price manipulation. Therefore, any credit or debit note received by the taxpayer (the importer) from its related supplier to perform a year-end Transfer Pricing adjustment must be filed to SARS within one month after receipt.  

Multinationals’ Work 

In order to avoid a lengthy investigation process and fines, we urge multinationals to: 

  • Prepare and maintain a Transfer Pricing policy, which accurately explains the adjustments and information related to related party transactions and the criteria or formulas to be applied to establish the transaction value of imported goods; and  
  • Notify SARS Customs in advance of the existence of such a policy and the possible effects that the repricing clauses may have on the customs value of imported goods.