Section 17, The Finance Act, 2021

Section 95 of the Income Tax Act 2000 is amended byrepealing and replacing subsection (1) with the following new (1) Where a transaction exists between associated persons they shall calculate their income and tax payable according to the arm's length principle. (2) The arm's length principle referred to under subsection (1) requires associated persons to calculate income and tax payable as if the conditions of any transaction between those persons had been made between independent persons acting in the same circumstances. (3)The conditions of any transaction referred to under sub-section (2) includes prices and other terms in place between the associated persons, the structure and characterization of the transaction and whether the transaction would have occurred between independent persons in the same circumstances. " Transfer Pricing of Section 89 2000 . of Section 95 2000 . (4) The Minister responsible for finance may by statutory instrument make regulations relating to transfer pricing to be administered by the Commissioner General for the purpose of dealing with related party and other transactions. (5) Where, in the opinion of the Commissioner- General, a person has failed to comply with subsection (1), the Commissioner-General may make adjustments consistent with subsection (1) and in doing so the Commissioner-General may apply the arm's length conditions of any transaction, including- (a)disregarding a transaction made between associated persons, if no transaction would have been made between independent persons acting in the same circumstances; (b) disregarding a transaction and replacing it with an alternative transaction that is structured and characterised in accordance with the conditions that would be in place had the transaction been between independent persons in the same circumstances (c) recharacterizing debt financing as equity financing. (6) This section shall apply to a transaction between a permanent establishment in Sierra Leone and its non-resident owner as if the permanent establishment and its non-resident owner were separate persons. (7) A person undertaking a transaction with an associated person during a year of assessment shall disclose the following- (a) the relationship with the associated person; (b) the value of the transaction; (c) the transfer pricing method used to ascertain that the pricing of the transaction is in accordance with the arm's length principle; and (d) the financial data derived from comparable transactions used in the transfer pricing method. (8) For the purpose of this section, (a) "transaction" means an arrangement, scheme, undertaking, promise, understanding, dealing, plan, whether expressed or implied, whether or not enforceable by legal proceedings and involving directly or indirectly, more than one person. (b) associated persons shall include parent or holding companies, subsidiary companies, associates, or joint ventures, irrespective of their residential status for tax purposes