By Mbatjiua Ngavirue WINDHOEK Businesses that are subsidiaries or branches of a foreign company face a new challenge with the government’s introduction of measures to combat so-called “transfer pricing”. To help their clients tackle the complex area of tax law, PricewaterhouseCoopers last Thursday held a function to introduce the local business community to the implications of the new Practice Note on Transfer Pricing. The accounting firm says the event was aimed at informing directors, shareholders, and tax and finance professionals who work within multinationals engaged in sizeable cross-border transactions. The Namibian Income Tax Act was amended with effect from 14 May 2005 to make provision for the determination of taxable income of certain persons in respect of international transactions. PricewaterhouseCoopers says the current practice of transfer pricing, whereby companies shift taxable income from an entity in one country to an entity in another, has necessitated the amendments. The first Income Tax Practice Note on Transfer Pricing (Section 95A of the Income Tax Act) has been issued and is effective from 5 September, 2006. The accounting firms says the objective of the Practice Note is to provide taxpayers with guidelines about the procedures to be followed in the determination of arm’s-length prices taking into account the Namibian business environment. It also sets out the Minister of Finance’s views on documentation and other practical issues that are relevant in setting and reviewing transfer pricing in international agreements. Managing Director of PricewaterhouseCoopers, Albe Botha, and Tax Director of the firm, Gerald Riedel, gave the presentation on transfer pricing. Another Tax Director, Patty Karuaihe-Martin, briefed the audience on the tax audit being carried out on all taxpayers in the Windhoek district starting last Monday. The focus of the tax audit will be on compliance and people will therefore now be forced to start complying on all their taxes. Inland Revenue collected over N$1 billion in unpaid taxes when it carried out a similar exercise in Oshakati recently. Karuaihe-Martin recommends that taxpayers make sure they have a zero balance with Inland Revenue. This means they should neither owe money to, nor have what she jokingly referred to as “investments” with, Inland Revenue. Companies, she added, needed to carry out a “tax health check” to make sure that what they are doing is right in terms of meeting their tax obligations. “People do a lot of reconciliations, but the one thing they don’t do is tax reconciliations,” she said. She warned taxpayers against trying to argue they did not know about particular tax provisions, as Inland Revenue would simply respond that ignorance of the law is no excuse.
19.5 ° C