Safe Harbour Regimes in Transfer Pricing: An African Perspective

The transfer pricing methods established by the transfer pricing rules and practices of countries (generally modelled after the OECD Transfer Pricing Guidelines) are not only complex to implement, but also fraught with challenges – such as the availability of comparables for benchmarking purposes, accessibility of databases and the capacity of tax authorities to implement them. For tax authorities in African countries, these challenges are further amplified, for example, by lack of resources, especially human and capital, and little experience in applying transfer pricing rules. As a result of these challenges, achieving arm’s length prices for transactions between related entities has posed a significant burden and cost to both taxpayers and tax authorities.This paper analyses the adoption and application of safe harbour regimes by African countries, and how they should be designed. It recommends the cautious adoption and application of safe harbour regimes by tax authorities in African countries to achieve increased revenue collection, tax efficiency, certainty, simplicity and convenience, and to circumvent the complicated comparability analysis.