Tax, VAT, customs and trade alerts

We provide a wealth of publications by PwC South Africa providing informed commentary on current developments in the tax arena, both locally and internationally.
Through analysis and comment on new law and judicial decisions of interest, they assist business executives to identify developments and trends in tax law and revenue practice that might impact their business.
 

In this alert:

The double taxation agreement between the Netherlands and South Africa (“the SA-Netherlands DTA”) expressly only provides for a minimum rate of 5% on dividends paid by Dutch resident companies to South African residents (and vice versa). However, the dividends article in this DTA also includes a “most favoured nation” clause (“the Dutch MFN clause”). For some time, the position taken by many taxpayers is that the Dutch MFN clause, (when read with at least two other DTAs), can (provided, of course, that the requirements as to beneficial ownership and shareholding in the company declaring the dividends are met) effectively result in an exemption from Dutch or South African dividends tax.

When applying the dividends article in the SA-Netherlands DTA to dividends paid by South African companies to Dutch shareholders, the South African Revenue Service (“SARS”) has not agreed with the above position, and is of the view that the lowest rate possible in respect of dividends is 5%.

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The Dutch courts have, however, held that the exemption applies in respect of dividends paid by Dutch resident companies to their South African shareholders. In October 2015, a Dutch District Court held that dividends paid by a Dutch resident company to its South African shareholder were, as a result of the application of the MFN clause, exempt from Dutch dividends tax. On appeal by the Dutch revenue authorities against the decision of the District Court to the Dutch High Court (Hertogenbosch), the decision of the District Court was, as per a judgment of the Dutch High Court (Hertogenbosch) dated 17 August 2017 and published on 31 August 2017, confirmed by the High Court.

These decisions of the Dutch Courts have important implications for dividends paid by South African residents to their Dutch shareholders.

The Dutch courts have, however, held that the exemption applies in respect of dividends paid by Dutch resident companies to their South African shareholders. In October 2015, a Dutch District Court held that dividends paid by a Dutch resident company to its South African shareholder were, as a result of the application of the MFN clause, exempt from Dutch dividends tax. On appeal by the Dutch revenue authorities against the decision of the District Court to the Dutch High Court (Hertogenbosch), the decision of the District Court was, as per a judgment of the Dutch High Court (Hertogenbosch) dated 17 August 2017 and published on 31 August 2017, confirmed by the High Court.

These decisions of the Dutch Courts have important implications for dividends paid by South African residents to their Dutch shareholders.

The Dutch courts have, however, held that the exemption applies in respect of dividends paid by Dutch resident companies to their South African shareholders. In October 2015, a Dutch District Court held that dividends paid by a Dutch resident company to its South African shareholder were, as a result of the application of the MFN clause, exempt from Dutch dividends tax. On appeal by the Dutch revenue authorities against the decision of the District Court to the Dutch High Court (Hertogenbosch), the decision of the District Court was, as per a judgment of the Dutch High Court (Hertogenbosch) dated 17 August 2017 and published on 31 August 2017, confirmed by the High Court.

These decisions of the Dutch Courts have important implications for dividends paid by South African residents to their Dutch shareholders.

Previous editions: Tax, VAT, customs and trade alerts

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Liability of non-executive directors to account and register for VAT

In February this year, we issued a Tax Alert dealing with Binding General Ruling (“BGR”) 40 and BGR 41, which deal with the employees’ tax and VAT implications of directors’ fees received by non-executive directors (“NEDs”) respectively. The South African Revenue Service (“SARS”) recently published an updated version of BGR 41, which deals with the VAT implications. The updated version of BGR 41 (Issue 2) replaces the version of BGR 41 published in February. Essentially, the new version of BGR 41 addresses the liability of non-executive directors (“NEDs”) to register and account for VAT before the date on which BGR 41 is to start applying (i.e. 1 June 2017).


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