Africa – Mining and Transfer Pricing

Most Sub Saharan African jurisdictions see the area of mineral transfers/sales as the main transfer pricing risk, but only few have systems in place to check if prices applied to minerals transferred to related parties comply with the arm’s length principle.

Studies highlights a strong need for capacity strengthening in the area of transfer pricing throughout the African continent and for enhancing the knowledge of mining industry within tax authorities. South Africa has, for many years, been the leader in transfer pricing audits among the African countries. But emerging countries such as Nigeria, Ghana, Kenya, Tanzania, Mozambique, are now making a concerted effort to develop transfer pricing capability.

In Tanzania, for example, the Acasia Mining Plc. was recently  issued a USD 190 billion tax bill. The assessment demonstrates a strong political will in Africa to address transfer pricing non-compliance.

A paper commissioned by the World Bank highlights transfer pricing issues within the African Mining industry. Not surprisingly, it seems that most of the transfer pricing problems relates to the use of Group Hubs placed in low tax jurisdictions recieving excessive payments for sales and marketing services, financing, technology services and thereby eroding the tax base in Africa.

Transfer pricing practices within the mining sector are also being investigated by the Australien Parliament.

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