Status overview of DTAs and Protocols

The purpose of the agreements between the tax administrations of two countries is to enable the administrations to eliminate double taxation.

The Double Taxation Agreements (DTAs) and Protocols that are already in force, have been divided into two groups to make navigation easier, i.e.-

(i) Africa

(ii) Rest of the world

For a full status on all the DTAs and Protocols, whether they are still under negotiation, already signed, but not ratified in one of the member states, or whether they are in force, refer to the status overview document here.

Of interest is the fact that the Kuwait Protocol has been signed, although not yet ratified, in 2021.

The DTA between SA and Kuwait currently provides for a dividends tax rate of 0%. Countries such as the Netherlands and Sweden, which have concluded DTAs with SA containing a so-called most-favoured nation (“MFN”) clause, have benefited from the 0% dividends tax rate set in the SA-Kuwait DTA.

This is due to the effect of a MFN clause which provides for the automatic application of a lower tax on dividends if SA and a third country (e.g. Kuwait) concluded a DTA which provides for a lower rate. To illustrate, despite the SA-Netherlands DTA prescribing a 5% dividends tax rate, due to its MFN clause in Article 10(10), it may apply a 0% dividends tax rate instead.

The signature of the Kuwait Protocol may signify the end of this benefit as it is anticipated that the Protocol will provide for a 5% dividends tax rate.

By all indications, those countries benefiting from the MFN clause will in high likelihood be subject to dividends tax at a rate of 5% going forward. We will provide an alert to this effect if the Protocol enters into force.

14/10/2021