The impact of section 31(2) of the Income Tax Act on the South African tax practice

M.Comm.The purpose of this study is to address in practice the uncertainty of how to treat the transfer pricing of goods and services between related parties as stated in section 31(2) of the Income Tax Act, Act 58 of 1962 (hereafter the Act). The scope of this study has been restricted to: Defining all the terminology directly applicable to transfer pricing legislation and interpretation; A comparative analysis of five countries and the Organisation for Economic Cooperation and Development's (hereafter OECD) model on transfer pricing methods; Related South African legislation which is affected; Requirements of business in relation to transfer pricing issues; Requirements of the Receiver of Revenue (hereafter the Receiver) in respect to transfer pricing transactions; and Conclusions and recommendations where applicable. The limitations are: The absence of substantial empirical evidence to support or refute certain conclusions reached in the report; and The availability of the publication of some of the recent information, as at the end of December 1997, of the countries under review, thus making comparison not entirely on equal footing