Chemical Technology November 2015

MINERALS PROCESSING AND METALLURGY

• Others that are specific to a country. African tax authorities are also becoming more integrated and their approach more unified, eg, ‘Transfer Pricing’ is a hot topic in Africa. There is growing focus by African states on ‘Transfer Pricing’ arrangements of multinational corpora- tions. Transfer pricing relates to the commercial agreements made between ‘related parties’, eg, sharing work between two offices in the same company one of which, for example, is in the USA and the other in South Africa. Sometimes related companies may engineer their inter- company commercial agreements in such a way so as to minimise or avoid taxes. So for example, if South Africa’s income tax rate is 28 %, whereas the US tax rate is, say, 20 %, a company may set up their intercompany rates to push more profits into the US, thus reducing the tax rate from 28 % to 20 %. The key is to ensure that all ‘related party’ transactions are based on an ‘arms-length’ principle. The ‘arms length’ principle, on which tax authorities work, is that pricing between related parties should be comparable to pricing to a third party non-related customer. That way

dividends, etc, of 10 % to 15 %. • Capital Gains Tax – On the sale of the asset (normally paid by the owner). • Income Tax – Normal income tax. • Dividends Tax – If dividends are paid, tax is deducted by the payer. • Donations Tax – The recipient is taxed but is also non deductable by the payer. • Excise Duties and Levies – The normal import and export payments. • Pay as you Earn (PAYE) – Employee tax. • Skills Development Levies – A small percentage of the company’s payroll. • Secondary Tax on Companies – Same as dividends but paid differently. • Value Added Tax (VAT) – Used by some countries instead of GST. • Sales Tax (GST) – Used by some countries instead of VAT. • Social Security Levy/Tax, eg, UIF – Similar to Skills De- velopment Levies

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Chemical Technology • November 2015