Double Taxation Conventions / Agreements

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Double Taxation Conventions / Agreements

• 4 August 2004

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South Africa UkraineDouble Taxation
Convention
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Introduction

• Closely follows the OECD Model Convention, which
  forms the foundation for the vast majority of
  Double Taxation Agreements (DTAs) worldwide
• A number of articles have timeframes or
  percentages attached to them that are usually the
  subject of negotiation. These articles and other
  articles of interest in the South Africa
  Ukraine Double Tax Convention are as follows

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Article 5 Permanent Establishment

• Construction
• 12 months in OECD Model
• 6 months in UN Model
• 12 months in South Africa Ukraine DT Convention
• Services Professional Services
• 183 days in UN Model
• More than 6 months in any 12 months in South
  Africa Ukraine DT Convention

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Article 8 International Transport

• Normally restricted to air and sea transport and
  is so in this Convention
• Extended to include profits derived from the
  rental on a bare boat basis of ships or
  aircraft used in international traffic, if such
  profits are incidental. (Standard SA clause)
• Extended to include profits from the use or
  rental of containers including trailers, barges
  and related equipment for the transport of
  containers.

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Article 10 Dividends

• Withholding tax of 5 or 15 proposed by OECD
  Model
• In practice, withholding taxes vary widely
  internationally
• South Africa Ukraine DT Convention
• Shareholding of 20 (OECD - 25) and more 5
• Other shareholding 15

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Articles 11 Interest

• Withholding tax of 10 proposed by OECD Model
• In practice, withholding taxes vary widely
  internationally
• South Africa Ukraine DT Convention 10
• The withholding will not apply, where interest is
  being paid by the Government of that Contracting
  State or is being paid to the Government of the
  other Contracting State or is in respect of loans
  made in application of an agreement concluded
  between the Governments of the Contracting States

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Article 12 Royalties

• No withholding tax proposed by OECD Model
• In practice, withholding taxes vary widely
  internationally
• South Africa Ukraine DT Convention
• Article 12 Royalties 10 (Clarification re PE,
  standard UN Model source rule clause)

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Article 21 Double Taxation

• Both South Africa and Ukraine use the credit
  method for eliminating double taxation

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Article 25 Assistance in Collection Collection

• Recent addition to OECD Model (2003)
• Underpinned by section 93 of the Income Tax Act,
  1962, which sets out the procedure for recovery
  of taxes on behalf of another tax authority

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Protocol

• Confirms that a South African branch profits tax
  of 35 does not infringe on Article 22 on
  non-discrimination with respect to permanent
  establishments as non-resident companies are
  exempt from the imposition of Secondary Tax on
  Companies (STC).

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South Africa KuwaitDouble Taxation Agreement

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Introduction

• Closely follows the OECD Model Convention, which
  forms the foundation for the vast majority of
  Double Taxation Agreements (DTAs) worldwide
• A number of articles have timeframes or
  percentages attached to them that are usually the
  subject of negotiation. These articles and other
  articles of interest in the South Africa Kuwait
  DTA are as follows

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Article 5 Permanent Establishment

• Construction
• 12 months in OECD Model
• 6 months in UN Model
• 6 months in South Africa Kuwait DTA
• Services Professional Services
• 183 days in UN Model
• More than 6 months in any 12 months in South
  Africa Kuwait DTA (with specific reference to
  substantial technical, mechanical or scientific
  equipment or machinery)
• Professional Services addressed in Article 14
  (183 days)

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Article 8 International Transport

• Normally restricted to air and sea transport and
  is so in this DTA
• Extended to include profits derived from the
  rental on a bare boat basis of ships or
  aircraft used in international traffic, if such
  profits are incidental. (Standard SA clause)
• Extended to include profits from the use or
  rental of containers including trailers, barges
  and related equipment for the transport of
  containers.

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Article 10 Dividends

• Withholding tax of 5 or 15 proposed by OECD
  Model
• In practice, withholding taxes vary widely
  internationally
• South Africa Kuwait DTA
• No withholding

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Articles 11 Interest

• Withholding tax of 10 proposed by OECD Model
• In practice, withholding taxes vary widely
  internationally
• South Africa Kuwait DTA No withholding

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Article 12 Royalties

• No withholding tax proposed by OECD Model
• In practice, withholding taxes vary widely
  internationally
• South Africa Kuwait DTA
• Article 12 Royalties 10 (Clarification re PE,
  standard UN Model source rule clause)

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Article 20 Teachers Researchers

• Where teaching, giving lectures or carrying out
  research
• At invitation of Government, University, College,
  School, Museum, Cultural Institution or as a
  result of a Cultural Exchange
• For a period not exceeding 2 years
• Not taxed in host country provided such
  remuneration is derived from outside the host
  country

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Article 23 Double Taxation

• Both South Africa and Kuwait use the credit
  method for eliminating double taxation

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Assistance in Collection

• Recent addition to OECD Model (2003)
• Not in this DTA, legal basis for such assistance
  needs to be present in both countries and such
  arrangements will never operate unilaterally.