Browsing by Author "Spies, Stephan"

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    Taxability of non-resident online retailers in South Africa and the OECD’s BEPS action plan
    (Stellenbosch : Stellenbosch University, 2017-12) Spies, Stephan; Van Heerden, L; Stellenbosch University. Faculty of Economic and Management Sciences. School of Accountancy.
    ENGLISH SUMMARY : Section 9(2)(k)(ii) of the Income Tax Act requires the existence of a South African permanent establishment (PE) to impose a tax liability on non-resident online retailers. As part of the BEPS action plan, the OECD released an illustration of a multinational tax planning structure that is typically used in the industry of online retail (the OECD’s online retail structure). The OECD found that this structure generally avoids the liability to tax by not creating a PE in the consumer country. The objectives of the study were three-fold. The first objective was to create a case study of the OECD’s online retail structure in a South African context, while the second objective was to analyse and apply the meanings of the key terms in section 9(2)(k)(ii) to the aforementioned case study. The third objective was to determine whether the proposed amendments to the PE definition in action point seven of the BEPS action plan may impact the applicability of section 9(2)(k)(ii) in the context of the OECD’s online retail structure. It was established that all physical goods sold by non-resident online retailers in South Africa will meet the definition of an “asset”. Where a non-resident online retailer has created a South African PE, it was established that the revenue “attributable to” that PE in terms of section 9(2)(k)(ii) should be determined with reference to the Authorised OECD Approach for attributing profits to PEs. It was concluded that the OECD’s online retail structure, as applied in a South African context, does not create a South African PE, as defined. In this regard, the study established that an online retailer’s South African warehouses fall within the scope of activities specifically excluded from PE status. It was also established that the use of South African delivery couriers and internet service providers will not create a PE if they operate independently from an enterprise. It follows that section 9(2)(k)(ii) of the Income Tax Act does not apply to the OECD’s online retail structure in a South African context. However, it was found that the proposed amendments to the OECD’s definition of a PE in action point seven of the BEPS action plan may, depending on the circumstances, impact the interpretation of a PE in a South African context. Where the amendments apply, the activities performed by a South African warehouse are now required to have a “preparatory or auxiliary” character to qualify for the exemption from PE status. Previously, South African warehouses would generally be exempt from PE status without being subject to the “preparatory or auxiliary” requirement. The outcome in respect of the independent agents in the structure remains unaffected. The question of whether the warehousing activities of a particular non-resident online retailer have a “preparatory or auxiliary” character is case specific and should be determined with reference to an online retailer’s own business model. If it is concluded that a non-resident online retailer’s warehousing activities do not have a “preparatory or auxiliary” character, South Africa may acquire a taxing right on revenue that was previously not subject to tax.