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South Africa-Untd A Emirates

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Tax Treaty between South Africa and the U.A.E.

The income tax treaty between South Africa and the United Arab Emirates entered into force on 23 November 2016. The treaty, signed 23 November 2015, is the first of its kind between the two countries.

Taxes Covered

The treaty covers South African normal tax, withholding tax on royalties, dividend tax, withholding tax on interest, and tax on foreign entertainers and sportspersons. It covers U.A.E. income tax and corporation tax.

Service PE

The treaty includes the provision that a permanent establishment will be deemed constituted when an enterprise furnishes services within a Contracting State through employees or other engaged personnel for the same or connected project for a period or periods aggregating more than 9 months within any 12-month period.

Withholding Tax Rates

  • Dividends - 5% if the beneficial owner is a company directly holding at least 10% of the paying company's capital; otherwise 10%
  • Interest - 10%
  • Royalties - 10%

Limitation on Benefits

The beneficial provisions of Articles 10 (Dividends), 11 (Interest), and 12 (Royalties) will not apply if the main purpose or one of the main purposes of any person concerned with the creation or assignment of the shares, debt-claims, or other rights in respect of which the income is paid was to take advantage of those Articles by means of that creation or assignment. The limitation is included in each of those Articles.

Capital Gains

The following capital gains derived by a resident of one Contracting State may be taxed by the other State:

  • Gains from the alienation of immovable property situated in the other State; and
  • Gains from the alienation of movable property forming part of the business property of a permanent establishment in the other State.

Gains from the alienation of other property by a resident of a Contracting State may only be taxed by that State.

The final protocol to the treaty further clarifies that gains from the alienation of shares in a company or of securities, bonds or debentures will only be taxable in the Contracting State of which the alienator is a resident.

Double Taxation Relief

South Africa applies the credit method for the elimination of double taxation, while the U.A.E. applies the exemption method.

Effective Date

The treaty applies from 1 January 2017.

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