Highlights of the South Africa – United Arab Emirates – Income Tax Treaty
By Graeme Saggers, Nolands SA
South Africa has concluded a treaty with the United Arab Emirates (UAE) which was effective from the 1st of January 2017. This treaty is largely based on the OECD Model Tax Convention; some of the defining features of the treaty are as follows.
As is general treaty practice, one state may not tax the business profits of an enterprise of the other state unless the enterprise conducts business in the source state through a permanent establishment. Interestingly the definition of a ‘permanent establishment’ as defined in the treaty specifically includes the performance of professional services or other activities of an independent character by an individual, but only when those services or activities are performed for a period of period exceeding 183 days in any 12 month period.
With regards to passive income, the treaty limits withholding tax in the following way: dividends may not exceed 5%( if the beneficial owner is a company holding directly at least 10% of the shares in the paying company, or 10% in all other cases) interest and royalties are limited to 10%. The capital gains provision of the treaty is mostly standard; however, it does not have an express provision dealing with taxing rights relating to the disposal of shares which many other treaties contain.
The pension article deviates from the OECD model in that it specifically includes annuities and provides that the state in which the pensions, annuity or other similar income arose may tax that income. Finally, the treaty includes the standard provisions on the Mutual Agreement Procedure and the Exchange of Information.
Graeme SaggersNolands SA, Cape Town, South Africa
T: +27 21 658 6600
Graemeis the National Tax Partner for Nolands.He obtained his BCom (Hons) degree at Rhodes University and qualified as a Chartered Accountant in 2009 after completing his articles at KPMG.He joined Nolands in 2011 as an Audit Manager and was appointed as the Tax Director at Nolands in September 2014.
Nolands SA is a national auditing firm, with ten offices located in all major centres in South Africa, Zimbabwe and Mauritius, employing almost 200 people focused on providing the best possible solutions for its clients. Nolands prides itself on being “out of the ordinary” and its ability to integrate services and respond rapidly to clients’ needs.
Published: August 2017 l Photo: Ava Peattie - Fotolia.com