The corporate tax rate is 28%. Small business corporations (companies with only natural persons as members/owners and with gross income of less than ZAR 20M) are subject to a beneficial tax regime. A progressive income tax at rate between 0 and 28% will apply depending on the taxable income earned. Gold-mining companies taxed according to special formula. The Dividends Tax rate increased to 20% with effect from 22 February 2017.
Section 31 of the South African Income Tax Act 58 of 1962 (Income Tax Act) covers transfer pricing. Section 31(2) gives the commissioner the power to adjust the consideration of a transaction to an arm’s-length price for the purposes of computing the South African taxable income of a taxpayer. This rule applies to goods and services, both terms being defined in section 31(1), as well as to direct and indirect financial assistance. Section 31 is a discretionary section, which means that while the taxpayer can place some reliance on the fact that the commissioner must have applied due care and reasonableness in raising a transfer pricing adjustment, the onus of proof for rebutting such an adjustment rests with the taxpayer. Taxpayers are required to determine the taxable income, if different from that reported, that would arise from arm’s-length transactions. This places emphasis on self-assessment of the terms and results of the transactions with related parties and has implications for prescription and non-disclosure. It also allows the SARS to recharacterise transactions for transfer pricing purposes and apply a whole-of-entity approach. In terms of section 64C(2)(e), the SARS may, in certain circumstances, also deem an adjusted amount to be a dividend on which Secondary Tax on Companies (STC) is payable (currently 10%).