Double Taxation Conventions / Agreements

4 August 2004

South Africa – UkraineDouble Taxation

Convention

IntroductionClosely 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…

Article 5: Permanent Establishment

Construction12 months in OECD Model6 months in UN Model12 months in South Africa – Ukraine DT Convention

Services & Professional Services183 days in UN ModelMore than 6 months in any 12 months in South Africa

– Ukraine DT Convention

Article 8: International TransportNormally restricted to air and sea transport and

is so in this ConventionExtended 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.

Article 10: DividendsWithholding tax of 5% or 15% proposed by

OECD Model

In practice, withholding taxes vary widely internationally

South Africa – Ukraine DT ConventionShareholding of 20% (OECD - 25%) and more: 5%Other shareholding: 15%

Articles 11: InterestWithholding tax of 10% proposed by OECD ModelIn practice, withholding taxes vary widely

internationallySouth 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

Article 12: Royalties No withholding tax proposed by OECD Model

In practice, withholding taxes vary widely internationally

South Africa – Ukraine DT ConventionArticle 12: Royalties: 10% (Clarification re PE,

standard UN Model source rule clause)

Article 21: Double Taxation

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

Article 25: Assistance in Collection CollectionRecent 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

ProtocolConfirms 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).

South Africa – KuwaitDouble Taxation Agreement

IntroductionClosely 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…

Article 5: Permanent Establishment

Construction12 months in OECD Model6 months in UN Model6 months in South Africa – Kuwait DTA

Services & Professional Services183 days in UN ModelMore 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)

Article 8: International TransportNormally restricted to air and sea transport and

is so in this DTAExtended 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.

Article 10: DividendsWithholding tax of 5% or 15% proposed by

OECD Model

In practice, withholding taxes vary widely internationally

South Africa – Kuwait DTANo withholding

Articles 11: InterestWithholding tax of 10% proposed by OECD Model

In practice, withholding taxes vary widely internationally

South Africa – Kuwait DTA: No withholding

Article 12: Royalties No withholding tax proposed by OECD Model

In practice, withholding taxes vary widely internationally

South Africa – Kuwait DTAArticle 12: Royalties: 10% (Clarification re PE,

standard UN Model source rule clause)

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 yearsNot taxed in host country provided such

remuneration is derived from outside the host country

Article 23: Double Taxation

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

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.