On March 1, 2017 the South African Revenue Service SARS published Binding Private Ruling: BPR 26. The ruling determines whether dividends tax must be withheld when a dividend is paid to the beneficial owner that is a resident of the Kingdom of Sweden.

Sweden and South Africa concluded a DTA which, when read with the Protocol, includes a ‘most favoured nation’ clause.

In the ruling references to sections and articles are to sections of the Act and articles of the SA/Sweden treaty and the Protocol applicable as at December 7, 2016. Unless the context indicates otherwise any word or expression in this ruling bears the meaning ascribed to it in the Act or the Protocol.

In the ruling the following description of the proposed transaction is given:

“Company A is the beneficial owner of the shares in the Applicant and of any dividends that may accrue in respect of those shares. The Applicant proposes to pay a dividend to Company A.

Article II of the Protocol lays down that –

“[i]f any agreement or convention between South Africa and a third state provides that South Africa shall exempt from tax dividends ... arising in South Africa, or limit the tax charged in South Africa on such dividends ... to a rate lower than ... [5%], such exemption or lower rate shall automatically apply to dividends ... arising in South Africa and beneficially owned by a resident of Sweden”. 

In this regard, the SA/Kuwait tax treaty provides in article 10 paragraph 1 that should dividends be paid by a company that is a resident of South Africa to a resident of Kuwait who is the beneficial owner, those dividends would be taxable in Kuwait only.”

In BPR 267 of March 1, 2017 SARS made the following ruling in connection with the proposed transaction:

“The Applicant will not be required to withhold dividends tax from the dividend payments to Company A if Company A complies with the documentary requirements in section 64G(3).”

According to BPR 267, this binding private ruling is valid for a period of three years from December 7, 2016.

Click here to be forwarded to BPR 267, from March 1, 2017 as available on the website of the SARS.

 Copyright – internationaltaxplaza.info

Follow International Tax Plaza on Facebook

and

Stay informed: Subscribe to International Tax Plaza’s Newsletter! It’s completely FREE OF CHARGE!