SARS has set a R10bn annual revenue threshold for companies wishing to enter into advanced pricing agreements (APAs), the tax authority gazetted on Friday as it implements a long‑planned APA regime.
What SARS announced
The published rules make a consolidated annual revenue of R10bn the minimum test for groups to be eligible for an APA — a mechanism that provides upfront certainty on the pricing of cross‑border related‑party transactions. The R10bn threshold is a significant reduction from an initially proposed R50bn, which drew criticism during public consultations for being unattainable for most taxpayers.
In addition to the revenue test, SARS requires that the value of the affected transaction for each year of assessment exceed:
- R1bn for distribution or manufacturing functions; or
- R300m for intragroup services.
Why the change matters
APAs are designed to reduce transfer‑pricing disputes and give large, cross‑border businesses certainty about how their intercompany transactions will be taxed in South Africa. Transfer pricing has become one of the most material tax risks for firms operating across borders, and access to APAs alters how companies manage that risk.
Tax professionals and large companies argued during consultations that the original R50bn single‑entity threshold would exclude almost all domestic taxpayers with genuine transfer‑pricing complexity. One submission said the higher figure was “disconnected from the commercial realities” of the South African market and pointed out that existing country‑by‑country reporting applies a R10bn consolidated group threshold.
“Very few taxpayers in South Africa would meet the R50bn revenue threshold, which would render the APA programme inaccessible to the vast majority of taxpayers facing genuine transfer pricing complexity and uncertainty,” the submission said.
Practical and policy implications
By adopting the lower threshold, SARS narrows the gap between eligibility for APAs and other international reporting standards used in South Africa. However, the requirement that individual transactions exceed R1bn or R300m will still limit APAs to materially large cross‑border dealings.
Practically, the R10bn test means:
- More multinational groups consolidated at R10bn will be able to seek APAs, potentially reducing future disputes and costly litigation.
- Smaller multinationals with significant single transactions may still find APAs out of reach because of the transaction‑value tests.
- Tax certainty may encourage investment decisions that depend on predictable cross‑border tax treatment, but uptake will depend on SARS capacity and the cost of negotiating APAs.
| Eligibility element | Requirement |
|---|---|
| Consolidated annual revenue | R10bn |
| Distribution or manufacturing transaction value | R1bn |
| Intragroup services transaction value | R300m |
Outstanding questions
The published threshold answers a central point from consultations, but several practical issues remain unclear or will determine the programme’s usefulness:
- How SARS will measure consolidated revenue for multinational groups and whether consolidated group tests will be used in all cases.
- The administrative capacity and timelines SARS will apply when negotiating APAs, including bilateral or multilateral engagements with other tax administrations.
- How accessible the APA route will be in practice for taxpayers that meet the revenue test but face high costs and complexity in preparing APA applications.
SARS’s move to formalise an APA regime responds to a policy process dating back to 2020. The lowered threshold reflects industry and professional input during the consultation phase, which cautioned that an overly high bar would defeat the programme’s purpose of preventing disputes and providing certainty.
Further technical guidance is expected as SARS moves from gazetting the rules to implementing the APA framework. That guidance will shape how many multinationals can realistically use APAs and how the regime influences cross‑border investment and tax disputes in South Africa.
