Transfer pricing is a key international tax issue. As the internationalisation of South African business activity increases, transfer pricing will be placed high on the agenda for South African multinationals as well as the South African Revenue Service (“SARS”).udBusiness restructurings by multinational enterprises have been a widespread phenomenon in recent years. They involve the cross-border redeployment of functions, assets and / or risks between associated enterprises, with consequent effects on the profit and loss potential in each country. Restructurings may involve cross-border transfers of valuable intangibles, and they have typically consisted of the conversion of full-fledged distributors into limited-risk distributors or commissionaires for a related party that may operate as a principal; the conversion of full-fledged manufacturers into contract-manufacturers or toll-manufacturers for a related party that may operate as a principal; and the rationalisation and / or specialisation of operations.udThe interplay between transfer pricing, income tax and business restructuring is tantamount to the effective tax management of a multinational business, particularly those companies with segregated manufacturing and distribution entities worldwide.
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