The CFOO Centre and the preparation of applicable TP documentation
The Revenue Authorities in all East African countries have started to conduct transfer pricing (TP) audits and in East Africa, the tax authorities have issued assessments of more than USD 75 million. It is anticipated that TP will be the focus of all revenue authorities in East Africa in 2018 and beyond.
TP rules apply to cross border transactions and even though the TP rules do not make it an express statutory requirement for taxpayers to complete supporting transfer pricing documentation, in Kenya Rule 9 (1) gives the Commissioner of KRA the permission to request information, including documents relating to the transactions where the transfer pricing issues arise and a non-comprehensive list of the documents that the Commissioner may request is provided in Rule 9 (2).
The KRA (and the KRA is not alone in this instance as TRA and URA have followed suit) has interpreted these provisions to mean that a taxpayer is required to have documentation in place in readiness for any such request from the Commissioner.
TP rules apply between parties when organisations are deemed to be related to another as follows:
1. If one of the organisation participates directly or indirectly in the management, control or capital of the other organisation
2. A 3rd person participates directly or indirectly in the management, control or capital of both organisations
3. An individual who participates in the management, control or capital of the organisation of one, is associated by marriage, consanguinity or affinity to an individual who participates in the management, control or capital of the other.
How can we help?
The CFOO Centre has the necessary experience in TP documentation applicable to organisations based in East Africa. Our experience in TP documentation will ensure that your organisation will be covered fully by documentation requests by the Revenue Authorities in any East African country and will briefly cover inter-company transactions including:
1. Controlled transactions
2. Technical advisory services
3. Corporate guarantees
4. Management and financial services
5. Support services
6. Purchasing services
7. Sale of assets and tangible goods
8. Inter-company loans