The legal form, meaning the contract between related parties and its provisions, has always been among the factors that come into play when assessing whether prices applied in controlled transactions are arm’s length. This article discusses why the legal form of a transaction is important, looks at a common approach to preparing intragroup contracts, and explores some rules that should be followed when drafting those contracts to mitigate transfer pricing risks.

The power of the State Revenue Service (“SRS”) to adjust the amount of tax due is primarily laid down by section 23(1) of the Taxes and Duties Act. The period open to review is limited to three years, and it is generally accepted that a person’s tax burden cannot be revised outside this period. Yet the SRS takes the view that a person’s obligation to pay taxes is not limited in time and is not really covered by the statute of limitations. We have encountered a practice in which, on finding an incorrect tax payment for a period outside the three years, the person was given the option of voluntarily filing the relevant tax returns and paying additional taxes. To stimulate this voluntary action, the person was warned that the SRS might pass their information to the Finance Police in order to decide on starting a criminal prosecution. This practice is now developing in such a way that a taxpayer’s mistake in filing tax returns for earlier periods is interpreted as voluntary performance of their obligation and an action that cannot be rectified.
 

With the Covid-19 pandemic leading to many redundancies, the courts are increasingly hearing disputes over mistakes employers make in laying off their workers. This suggests a lack of understanding of how a workforce reduction should be achieved lawfully. It is important in this context for the employer to offer the worker another job before issuing a redundancy notice.