The South African Revenue Service (SARS) on February 12 released draft guidance on tax incentives for headquarters companies, designed to encourage MNEs to locate operations in South Africa as a gateway to African investment.
The law, effective for tax years after January 1, 2011, provides special tax breaks for qualifying companies, including relief from income tax, capital gains tax, and dividend tax, as well as relaxed transfer pricing rules. The law also exempts from withholding tax interest or royalties payed by a headquarters company to foreign persons, and includes an antiabuse rule.
The draft guidance clarifies the requirements to qualify as a headquarters company. It also delineates the scope of the tax benefits provided and the operation of the antiabuse rule.
Comments on the discussion draft are due May 31.
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