A distribution channel decision is very important. A foreign chemical additive manufacturer wishes to develop an indirect distribution channel into the China refinery and petrochemical market. The selection of a favorable distributor to work with in the China market will involve a number of complex decisions by the manufacturer. Developing the criteria and strategy to screen and select a China distributor is studied in this research. A mutual understanding and cooperation between the manufacturer and distributor to define explicit roles, expectations, and responsibilities is necessary. Three critical definitions include: 1) The contract terms and conditions, especially with regard to time period, contract termination, and consideration of efforts during contract life once contract is terminated; 2) Commitment of the manufacturer to fully support distributor once distribution contract is awarded; 3) The distributor¡¦s opportunities to expand distribution rights in return for strong performance. Motivating the owners and employees of the independent organizations in a distribution chain requires great effort. Methods of motivating a distributor organization will be reserved for a more advanced study in the future.

Résumé non transmis / Summary not transmitted

Controlled foreign company (CFC) rules are anti-avoidance provisions designed to deter taxpayers from shifting their capital (and resultant income) to low-tax jurisdictions. Adoption of these rules in South Africa coincided with the relaxation of exchange control laws which opened up borders to inward and outward capital flows. South Africa's CFC regime has been amended over the years to become one of the most sophisticated amongst the G20 and aligned with the Organisation for Economic Co-operation and Development's (OECD) Action 3 recommendations (per the OECD's Base Erosion and Profit Shifting Action Project). Abusive profit-shifting tactics committed by multinational enterprises (MNEs) have caused the OECD to recommend that CFC rules be strengthened globally to combat this behaviour. However, in the United States and the United Kingdom, recent reforms appear to have weakened these countries' CFC (or CFC-equivalent) legislation, countering the OECD's recommendations. Such manoeuvres improve the profitability of these nations' MNEs by allowing their tax bills to remain lower than their international competitors'. As such, there is a danger of starting a race to the corporate tax-rate bottom where developing nations will be the losers, considering their greater reliance on corporate tax revenues than their developed counterparts. India and Brazil, both developing nations and BRICS members like South Africa, also aren't prioritising the strengthening of their CFC regulations – their focus is rather on improving transfer pricing (TP) legislation and enforcement to combat the damaging effects MNEs' avoidance practices are having on tax revenue collections in those countries. The existence of South Africa's advanced CFC legislation amongst a global trend of a weakening in, or the non-adoption of, CFC rules may hinder the competitiveness of South African MNEs. The current CFC regime could thus serve the purpose of stifling growth and foreign direct investment, instead of only deterring profitshifting behaviour. TP legislation targeted at MNEs (the biggest profit-shifting culprits) may yield the most effective anti-avoidance results. South Africa's recently enhanced TP reporting requirements are key to solving the offshore profit-shifting puzzle, as these reports will reveal information about an MNE's global operations and resultant profit-shifting activities. In addition, the revision to the TP arm's length principle to align compensation and value creation, will see profit-shifting MNEs bear the tax they were trying to avoid. It appears that the anti-avoidance purpose embodied within CFC regulations overlaps with the anti-avoidance mechanisms that these enhanced TP rules are designed to achieve. Thus, in a South African context, the most efficient way to curb tax avoidance may be to rely on TP, rather than CFC, legislation. As such, it is recommended that South Africa's CFC regulations be repealed.

With constant changes in the nature of businesses, the way businesses are managed and the manner in which corporate groups are structured, a valid risk exists that legislation, including controlled foreign company (CFC) legislation can become outdated. The implication is that a country’s tax base will not be effectively protected. The aim of this mini-dissertation is to analyse section 9D of the South African Income Tax Act (58 of 1962) against the United Kingdom’s CFC regime to identify aspects of the new CFC rules enacted in Great Britain that could enhance South African CFC rules. Since the United Kingdom and South Africa levy income tax on a residence basis, it was concluded that the CFC regimes of these countries would be comparable. The research problem statement was determined to consider whether any aspects of the amended United Kingdom CFC legislation could be incorporated in the South African CFC rules to ensure that they are more accommodating to investors on the one hand and still protect the South African tax base efficiently on the other hand. The problem statement was addressed through the research objectives. Their findings are summarized as follows: 1 To determine what the factors and circumstances were that resulted in the revised CFC legislation in the United Kingdom. It was found that the Commissioner of Inland Revenue was applying the “motive test” very subjectively which resulted in resident-holding companies being taxed on legitimate trading profits of foreign subsidiaries. The “motive test” therefore lacked objectivity which resulted in the residents being taxed on the profits of their subsidiaries. Since section 9D of the South African Income Tax Act (58 of 1962) also applies a subjective test to consider the investor’s motives, it was concluded that the South African legislation is faced with a similar pitfall as the UK CFC legislation enacted in 1984. 2 To critically compare the CFC rules per section 9D of the South African Income Tax Act to the CFC legislation effective 1 January 2013 in the United Kingdom. It was found that the South African rules address a wider range of activities, whereas the UK CFC regime focuses on specific income streams. A number of aspects were identified where the two sets of legislation agree, but areas were also identified where the legislation differs. 3 To identify elements of the new CFC legislation in the United Kingdom that might improve the current South African CFC regime. The differences identified between the South African and United Kingdom CFC regimes were evaluated. It was concluded that there are elements of the South African legislation that should remain unchanged as it addresses specific risks. It was, however, also concluded that there are valid elements implemented in the UK CFC regime that could simplify the South African CFC legislation, enhancing its competitiveness while still retaining the integrity and effectiveness of the legislation. It was concluded that even though the differences between section 9D and the UK CFC regime may enhance section 9D when enacted in South Africa, these enhancements should be considered very carefully as they might create loopholes providing false progress to section 9D. / MCom (South African and International Taxation), North-West University, Potchefstroom Campus, 2014

With constant changes in the nature of businesses, the way businesses are managed and the manner in which corporate groups are structured, a valid risk exists that legislation, including controlled foreign company (CFC) legislation can become outdated. The implication is that a country’s tax base will not be effectively protected. The aim of this mini-dissertation is to analyse section 9D of the South African Income Tax Act (58 of 1962) against the United Kingdom’s CFC regime to identify aspects of the new CFC rules enacted in Great Britain that could enhance South African CFC rules. Since the United Kingdom and South Africa levy income tax on a residence basis, it was concluded that the CFC regimes of these countries would be comparable. The research problem statement was determined to consider whether any aspects of the amended United Kingdom CFC legislation could be incorporated in the South African CFC rules to ensure that they are more accommodating to investors on the one hand and still protect the South African tax base efficiently on the other hand. The problem statement was addressed through the research objectives. Their findings are summarized as follows: 1 To determine what the factors and circumstances were that resulted in the revised CFC legislation in the United Kingdom. It was found that the Commissioner of Inland Revenue was applying the “motive test” very subjectively which resulted in resident-holding companies being taxed on legitimate trading profits of foreign subsidiaries. The “motive test” therefore lacked objectivity which resulted in the residents being taxed on the profits of their subsidiaries. Since section 9D of the South African Income Tax Act (58 of 1962) also applies a subjective test to consider the investor’s motives, it was concluded that the South African legislation is faced with a similar pitfall as the UK CFC legislation enacted in 1984. 2 To critically compare the CFC rules per section 9D of the South African Income Tax Act to the CFC legislation effective 1 January 2013 in the United Kingdom. It was found that the South African rules address a wider range of activities, whereas the UK CFC regime focuses on specific income streams. A number of aspects were identified where the two sets of legislation agree, but areas were also identified where the legislation differs. 3 To identify elements of the new CFC legislation in the United Kingdom that might improve the current South African CFC regime. The differences identified between the South African and United Kingdom CFC regimes were evaluated. It was concluded that there are elements of the South African legislation that should remain unchanged as it addresses specific risks. It was, however, also concluded that there are valid elements implemented in the UK CFC regime that could simplify the South African CFC legislation, enhancing its competitiveness while still retaining the integrity and effectiveness of the legislation. It was concluded that even though the differences between section 9D and the UK CFC regime may enhance section 9D when enacted in South Africa, these enhancements should be considered very carefully as they might create loopholes providing false progress to section 9D. / MCom (South African and International Taxation), North-West University, Potchefstroom Campus, 2014

Since the declaration of South Africa as the Gateway to Africa in 2010 by National Treasury, various changes have been made to South African legislation to make South Africa more attractive to foreign investors looking to expand their operations into Africa. The headquarter company regime was introduced with the purpose to provide a base from which these investments may be managed. From a tax perspective this regime eliminates or reduces specific taxes or rates of taxes for companies who elect to be classified as headquarter companies, provided that certain requirements are met. These requirements refer specifically to investments in qualifying foreign companies. The reference to foreign companies inevitably requires that the resident definition be considered. In South Africa residence of a person other than a natural person is the place where the company is incorporated, formed or established or the place of effective management which is a term subject to various interpretations. Regardless of the differences, all the interpretations refer to a senior level of management. Foreign incorporated companies with their place of effective management in South Africa are excluded from the definition should they qualify as controlled foreign companies with foreign business establishments subject to a high level of tax if the place of effective management is disregarded. The lack of skills in African countries as a product of shortfalls in the quality of education result in challenges to establish appropriately skilled management teams in these countries. When a centralised management team is set up at the headquarter company in South Africa the African subsidiaries risk being resident in South Africa and therefore the structure would not qualify for the benefits of the headquarter company regime. Further challenges arise when the exclusion to the resident definition is applied as shares held by a headquarter company are disregarded when the controlled foreign company status of the subsidiaries are determined. Therefore it is recommended that the headquarter company legislation be changed to correspond with successful regimes such as the Luxembourg and the Netherlands in that it does not only apply to foreign investment. It is further recommend that the resident definition be changed to exclude from the place of effective management test group structures that would comply with section 9I should the test be disregarded. / MCom (South African and International Tax), North-West University, Potchefstroom Campus, 2014

Since the declaration of South Africa as the Gateway to Africa in 2010 by National Treasury, various changes have been made to South African legislation to make South Africa more attractive to foreign investors looking to expand their operations into Africa. The headquarter company regime was introduced with the purpose to provide a base from which these investments may be managed. From a tax perspective this regime eliminates or reduces specific taxes or rates of taxes for companies who elect to be classified as headquarter companies, provided that certain requirements are met. These requirements refer specifically to investments in qualifying foreign companies. The reference to foreign companies inevitably requires that the resident definition be considered. In South Africa residence of a person other than a natural person is the place where the company is incorporated, formed or established or the place of effective management which is a term subject to various interpretations. Regardless of the differences, all the interpretations refer to a senior level of management. Foreign incorporated companies with their place of effective management in South Africa are excluded from the definition should they qualify as controlled foreign companies with foreign business establishments subject to a high level of tax if the place of effective management is disregarded. The lack of skills in African countries as a product of shortfalls in the quality of education result in challenges to establish appropriately skilled management teams in these countries. When a centralised management team is set up at the headquarter company in South Africa the African subsidiaries risk being resident in South Africa and therefore the structure would not qualify for the benefits of the headquarter company regime. Further challenges arise when the exclusion to the resident definition is applied as shares held by a headquarter company are disregarded when the controlled foreign company status of the subsidiaries are determined. Therefore it is recommended that the headquarter company legislation be changed to correspond with successful regimes such as the Luxembourg and the Netherlands in that it does not only apply to foreign investment. It is further recommend that the resident definition be changed to exclude from the place of effective management test group structures that would comply with section 9I should the test be disregarded. / MCom (South African and International Tax), North-West University, Potchefstroom Campus, 2014

As a result of globalisation there are endless business opportunities out there in the business world. South African tax residents may purchase shares in a foreign company as an investment which can lead to that company being effectively controlled in South Africa for South African tax purposes. When a controlled foreign company ceases to be a controlled by South African tax residents it is deemed to have disposed of its assets the day immediately before this event and certain exit tax charges should considered. Sound tax policies are crucial to ensure stability in any tax system. Tax legislation may be amended from time to time in order to ensure this stability in the South African tax system. No research has been done on the practical implication of current amendments to legislation affecting a controlled foreign company when it ceases to be controlled in South Africa as a direct result of the issuing of new equity shares by the controlled foreign company to foreign investors. The aim of this study was to discuss the current amendments to tax legislation affecting controlled foreign companies as well as the practical issues experienced by controlled foreign companies and South African tax residents. Furthermore, the study aims to demonstrate whether South Africa’s tax legislation is in line with the international norm by comparing the literature reviewed, the results of case study and information gathered through interviews to the United Kingdom’s tax legislation. / Dissertation (MCom)--University of Pretoria, 2014. / hb2014 / Taxation / unrestricted

Controlled foreign company ('CFC') legislation was introduced in phases to co-incide with South Africa?s move from a source based system to a residence based system. Initially with the introduction of the legislation it was directed at those foreign entities earning passive income. However, over the years the legislation has been amended to include active income of entities and additional aspects to the section have been inserted to provide clarity for taxpayers. An increase in cross border transactions and offshore investment has necessitated the need to introduce CFC legislation into the revenue codes of many countries, South Africa being one of them. In most revenue codes where CFC or similar legislation has been introduced it is one of the most complex areas in a country's revenue code (Sandler, 1998:23). This mini-dissertation aims to interpret section 9D and also aims to provide guidance on its application in practice with the help of practical examples and reference to relevant international case law. The end result of this research is a proposed interpretation note on section 9D which is attached as Appendix 1. / Thesis (M.Com. (Tax))--North-West University, Potchefstroom Campus, 2011.

Controlled foreign company ('CFC') legislation was introduced in phases to co-incide with South Africa?s move from a source based system to a residence based system. Initially with the introduction of the legislation it was directed at those foreign entities earning passive income. However, over the years the legislation has been amended to include active income of entities and additional aspects to the section have been inserted to provide clarity for taxpayers. An increase in cross border transactions and offshore investment has necessitated the need to introduce CFC legislation into the revenue codes of many countries, South Africa being one of them. In most revenue codes where CFC or similar legislation has been introduced it is one of the most complex areas in a country's revenue code (Sandler, 1998:23). This mini-dissertation aims to interpret section 9D and also aims to provide guidance on its application in practice with the help of practical examples and reference to relevant international case law. The end result of this research is a proposed interpretation note on section 9D which is attached as Appendix 1. / Thesis (M.Com. (Tax))--North-West University, Potchefstroom Campus, 2011.