South Africa Court Rejects Related-Party Rate Reflecting US Rule

In what could have been a classic transfer pricing battle over which methodology is most appropriate, the approaches used by the South Africa Revenue Service’s two expert witnesses had no basis in the OECD Transfer Pricing Guidelines or in economic logic.

On February 14, 2024, the Tax Court of South Africa decided in favor of ABD Limited that the intercompany royalty rate owed by the telecommunications company’s 14 foreign operating affiliates throughout Africa should be only 1% of revenues for the 2009-2012 period addressed in the litigation. While the affiliates have minority shareholders, ABD’s South African parent is the majority ...