Section 50C — State Sales Tax Enactment 1998

(2)

Subject to subsection (3), where a person enters into a transaction with an associated person for selling or providing taxable goods, then, for all purposes of this Enactment, that person shall determine and apply the arm’s length price for the selling or providing of such taxable goods.

(3)

Where the Director has reason to believe that any taxable goods referred to under subsection

(2)

is sold or provided at a price which is less than or greater than the price which it might have been expected to fetch if the parties to the transaction had been independent persons dealing at arm’s length, the Director may in the determination of the State sales tax of the person, substitute the price in respect of the transaction to reflect an arm’s length price for the transaction.

(4)

The Director may disregard any structure adopted by a person in entering into a transaction if -

(a)

the economic substance of that transaction differs from its form; or

(b)

the form and substance of that transaction are the same but the arrangement made in relation to the transaction, viewed in totality, differs from those which would have been adopted by independent persons behaving in a commercially rational manner and the actual structure impedes the director from determining an appropriate transfer price.

(5)

Where the Director disregards any structure adopted by a person entering into a transaction under subsection (4), the Director shall make adjustments to the structure of that transaction as he thinks fit to reflect the structure that would have been adopted by an independent person dealing at arm’s length having regard to the economic and commercial reality.

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(6)

The Director may, by notice in writing, impose a surcharge to be paid of not more than five percent of the amount of increase of any State sales tax generally or any reduction, deduction or loss, as the case may be, in exercising his powers to substitute the price in respect of a transaction entered into by a person to reflect an arm’s length price for that transaction or to disregard any structure adopted by a person entering into a transaction.

(7)

Any surcharge required to be paid by a person under subsection (6) shall be collected by the

Director as if it were State sales tax payable by that person, but shall not be treated as State sales tax so payable for the purposes of any provision of this enactment other than section 14, 17 and 20.

(8)

The transactions under subsections (2) and (4) shall be construed as a transaction between-

(a)

persons one of whom has control over the other;

(b)

individuals who are relatives of each other; or

(c)

person both of whom are controlled by some other person, in this section referred to as “third person”.

(9)

For the purpose of subsection (8), “control” refers to persons one of whom owns shares of the other person, or a third person who owns shares pf both persons, where the percentage of the share capital held in either situation is twenty per cent or more and -

(a)

the business operations of that person depends on the proprietary rights, such as patents, non-patented technological know-how, trademarks or copyrights, provided by the other person or a third person;

(b)

the business activities, such as purchases, sales, receipt of services, provision of services, of that person are specified by the other person, and the prices and other conditions relating to the supply are influenced by such other person or a third person; or

(c)

where one or more of the directors or members of the board of directors of a person are appointed by the other person or a third person.

(10)

In this section, “relative” means any person connected by blood or marriage or legal adoption, or a legal guardian.

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