South Africa’s transfer pricing landscape has shifted sharply in 2025–2026, driven by aggressive SARS litigation, tightened procedural limits on SARS, and a renewed focus on substance, people functions, and offshore IP structures. The three most important developments come from major court cases and SARS’s evolving enforcement posture.
1. SARS v SC (Pty) Ltd (Tax Court, April 2025)
Key shift: SARS is now explicitly challenging offshore IP and treasury structures where South African entities perform the real value-creating functions.
What the court emphasised
- Substance over form: The court accepted SARS’s argument that the Mauritian IP entity (SIL) was largely administrative, while the South African entity (SC) performed the strategic, value-driving functions.
- People functions matter: SARS focused on where the actual decision-making and development of marketing intangibles occurred.
- Methodological flexibility: SARS was allowed to amend its Rule 31 statement to introduce an additional TP method during litigation.
Why this matters
This case signals that SARS will:
- Attack Mauritius and other low-tax IP structures where SA entities perform DEMPE functions.
- Use multiple TP methods in litigation.
- Scrutinise service fees, franchise fees, and procurement/admin charges paid offshore.
2. BASF South Africa v CSARS (Johannesburg High Court, April 2026)
Key shift: SARS is not allowed to change its case mid-litigation.
What the High Court held
- SARS cannot introduce new legal bases or fundamentally new arguments after issuing an assessment.
- The assessment must stand or fall on the original factual and legal foundation.
- SARS cannot “reshape” its case under the guise of providing additional support.
Why this matters
This ruling limits SARS’s procedural flexibility, directly countering the broader latitude SARS gained in the SC (Pty) Ltd case. It strengthens taxpayers’ ability to challenge SARS when it attempts to:
- Introduce new TP methods late in the dispute,
- Add new comparables or new economic theories,
- Reframe the nature of the affected transaction.
3. A new era of aggressive SARS enforcement (2025–2026)
Across both cases, a clear pattern emerges:
SARS is now focusing on:
- Offshore IP holding companies (Mauritius, UAE, Luxembourg, etc.)
- Treasury centres and cross-border cash pooling
- Management fees and procurement fees
- Marketing intangibles and DEMPE analysis
- TNMM benchmarking for manufacturers and distributors
- CUP challenges for service fees and royalties
SARS is increasingly:
- Challenging functional characterisation (who really performs the value-adding work).
- Using expert economic reports to support adjustments.
- Issuing large upward adjustments (e.g., ZAR 118m and ZAR 162m in SC case).
4. Practical implications for South African multinationals (2026)
You now need:
- Robust DEMPE analysis for any offshore IP structure.
- Clear evidence of people’s functions and decision-making location.
- Contemporaneous TP documentation that aligns with actual conduct.
- Defensible benchmarking—SARS is attacking comparability aggressively.
- Procedural vigilance: challenge SARS if it tries to expand its case after issuing an assessment (BASF precedent).
5. Summary table: What changed and why it matters
Development | What changed | Why it matters |
SC (Pty) Ltd case (2025) | SARS can introduce alternative TP methods during litigation | More aggressive SARS litigation strategy |
BASF case (2026) | SARS cannot change legal basis of assessment mid‑dispute | Stronger taxpayer procedural protection |
SARS enforcement trend | Focus on DEMPE, offshore IP, service fees | Higher audit risk for African/Mauritius structures |
Benchmarking scrutiny | CUP and TNMM analyses challenged | Need for stronger comparability and economic evidence |