SARS released 2nd Issue of Interpretation Note 87 on Headquarter Companies which is intended to clarify the interpretation and application of section 9I which deals with headquarter companies.
The Headquarter (HQ) company regime of South Africa was introduced to entice foreign companies with operations on the African continent to set up their regional holding companies in SA. As such the HQ regime exempted the regional holding companies from local CFC rules, withholding taxes on dividends and interest payments and thin capitalisation rules.
It would seem that the Issue 2 of Interpretation Note 87 (IN 87) which was released on 28 November 2018 stems from SARS desire to strengthen the anti-avoidance rules with a view of ensuring that special tax
IN 87 (Issue 2) on Headquarter Companies thus provides guidance and clarity on the interpretation and application of section 9I of the headquarter companies in the Income Tax Act.
The note also briefly discusses other provisions of the Act that provide special tax relief for headquarter companies, as well as the specific anti-avoidance rules that are designed to prevent misuse or abuse of those provisions.
