Durban — US-based multinational software giant TIBCO could be in hot water for alleged non-compliance with South African tax laws.
According to findings conducted by global auditing firm KPMG, the company failed to make important disclosures when it had been asked to verify its business operations in South Africa, to confirm its tax obligation to the South African Revenue Service (SARS).
The company was suspected of cleverly disguising the movement of it profits out of the country by classifying its expenses as management fees and not as the sale of software.
According to information seen by the Daily News, the company is alleged to have been practicing this since 2006.
TIBCO SA is a South African entity 100% owned by TIBCO and has sold software exceeding R1 billion through its local business.
The US multinational was said not to be paying the appropriate taxes as they reduced their profit to less than 10% by moving the money out of the country disguised as management fees.
The Daily News had also sought clarity on its VAT obligations as foreign payments should have been zero-rated. TIBCO has not responded.
According to further information obtained, allegations state that the company's financial declaration to SARS did not accurately reflect foreign-related party payments as required by South African authorities.
An independent audit opinion by KPMG, which the paper, has seen was presented to TIBCO and its auditors, Mazaars, on the fact their SARS declaration about foreign payments was not according to requirements.
TIBCO's auditors were not supportive in resolving the issue.
There have been several attempts by local black-owned firms’ executives to encourage TIBCO to fix their accounting records.
According to documents, TIBCO also operated multiple companies in South Africa to ensure that they had 100% control of how the profits left the country.
The company’s alleged practice may have cost South Africa hundreds of millions of rand in tax revenue.
In the KPMG audit opinion compiled in 2016, it was discovered that when TIBCO was asked whether it had received or accrued any foreign income or incur any foreign expenditure or pay royalties, interest or dividends to a non-resident, the answer was “no”.
The report meant that the relevant transfer pricing section of the return question did not open for completion.
The KPMG report further stated that as per the information provided by one of TIBCO's partners in South Africa that the company was accruing foreign expenditure, the answer to the question should have been “yes” and that the necessary disclosure should have been made in the transfer pricing section of the tax return.
“With regard to the disclosure, we note that we are of the view that although this incorrect disclosure does not impact the calculation of the taxable income, from a SARS point of view, this may be viewed as non-disclosure or misrepresentation. If the non-disclosure or misrepresentation is considered by SARS to be material to the tax return, the tax return may not be prescribed and will remain open indefinitely for revision by SARS. Accordingly, there is a risk that the tax return may not prescribe and may be open for revision by SARS. Where transactions are viewed as not being carried out at an arm’s length basis, SARS can make an adjustment to the taxable income of the entity,” read KPMG’s findings.
According to TIBCO's website it is part of a wide network of various subsidiaries which include Citrix who all belong to the conglomerate Cloud Software Group.
Other trading divisions include Netscaler, Jaspersoft, iBi, Xenserver, Sharefile.
In its response SARS said that in terms of Section 69 (1) of the Tax Administration Act (No 28, 2011) SARS officials may not disclose taxpayer information to a third party and this includes possible investigations against a tax payer.
The company directors who were said to be overseas did not respond to the questions sent to them but since they had previously referred queries to its attorney in SA the paper sent questions to the Thomson Wilks firm. Attorney Jason Hunter responded by saying he was not privy to the company’s internal information except for representing it in its litigation case against TechSoft, its local BBBEE partner in SA.
TechSoft, when asked for comment, was also not happy with the treatment it had been subjected to by the US giant.
Techsoft Group Corporate Affairs Executive Brian Mpono said SARS should not only investigate TIBCO’s tax compliance but must expand the investigation to all multinational companies.
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