Challenges and implications of applying the Zimbabwean domestic transfer pricing rules : an SME perspective

Abstract

PURPOSE: Transfer pricing has largely been viewed in the context of crossborder transactions of multinational enterprises. Zimbabwe recently revised its transfer pricing rules to include domestic transactions. This study sought to explore the challenges and implications of transfer pricing legislation for SMEs.

METHODOLOGY: A qualitative inquiry is applied with the use of in-depth interviews and a questionnaire survey. Thematic analysis was used to analyse both interview and questionnaire data.

FINDINGS: The findings revealed that the paradox of observing fairness as a canon of taxation by equally taxing domestic and cross-border transactions has both economic and social implications for the Zimbabwean economy. It was evident that SMEs find themselves unduly burdened with compliance costs, capacity limitations as well as knowledge constraints in complying with the rules.

ORIGINALITY OR VALUE: The implications of transfer pricing rules on SMEs have not been explored in the Zimbabwean context. The study explores a critical sector that has often been neglected in the transfer pricing discourse. It recommends that the government revisit the applicability of domestic transfer pricing legislation to SMEs.