Australia and South Africa treaty - key points
The protocol between Australia and South Africa for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income (the 2008 South African Protocol) was signed in Pretoria on 31 March 2008, and amends the existing agreement between Australia and South Africa which was signed in 1999.
The 2008 South African Protocol entered into force on 12 November 2008.
For Australian withholding tax on income derived by a non-resident, the 2008 South African Protocol has effect in relation to income derived on or after the 1 January 2009. For other Australian taxes covered by the protocol, the protocol has effect in respect of income, profits or gains of years of income beginning on or after 1 July 2009.
For South African taxes withheld at source on amounts paid or credited, the 2008 South African Protocol has effect from 13 November 2008. For other South African taxes, the protocol has effect in respect of years of assessment beginning on or after 1 January 2009.
The Exchange of Information article [Article 25] has effect from 12 November 2008.
The Assistance in the Collection of Taxes article [Article 25A] will have effect from a date to be agreed in the exchange of notes through the diplomatic channel.
Dividends, interest and royalties may generally be taxed in the country in which the beneficial owners of such income are residents and may also be subject to tax in the country from which such income is paid up to certain limits [Articles 10 to 12].
Source country taxation on dividends beneficially owned by a resident of the other country is limited to 5% where the beneficial owner of the dividend is a company is resident in the other country and holds directly at least 10% of the voting power of the company paying the dividends [Article 10, subparagraph 2(a)]; and limited to 15% in all other cases [Article 10, subparagraph 2(b)].
The dividend rate limits apply to the gross amount of the dividend and to both franked and unfranked dividends.
Source country taxation on interest beneficially owned by a resident of the other country is limited to 10% [Article 11, paragraph 2]. However, no tax will be payable in the source country on interest beneficially owned by a resident of the other country that is derived by:
- the other country or a political or administrative subdivision or a local authority thereof, or any other body exercising governmental functions in that country or a bank performing central banking functions in that country [Article 11, subparagraph 3(a)]; or
- a financial institution that is unrelated to, and dealing wholly independently with, the payer [Article 11, subparagraph 3(b)].
Source country taxation on royalties beneficially owned by a resident of the other country is limited to 5% [Article 12, paragraph 2].
The definition of royalty includes payments or credits made as consideration for the use of, or right to use, images or sounds in connection with television or other broadcasting and some or all of the radiofrequency spectrum specified in a spectrum licence, but not for the use of, or right to use, industrial, commercial or scientific equipment [Article 12, paragraph 3].
Income, profits or gains from the alienation of real property and shares or other interests in land rich entities, and from the alienation of business assets of a permanent establishment or pertaining to a fixed base available in the country for the purposes of performing independent personal services, may generally be taxed by the country in which the property, permanent establishment or fixed base is situated. Gains of a capital nature arising from the alienation of other property will generally be taxable only in the country of residence [Article 13].
Rules in the 2008 South African Protocol will protect nationals from tax discrimination in the other country. However, the article does not apply to anti-avoidance rules (including thin capitalisation, dividend stripping, transfer pricing and controlled foreign companies measures), rebates or credits for dividends paid by resident companies, research and development concessions, consolidation rules or capital gains deferral rules [Article 23A].
Consultation and exchange of information between the two tax authorities is authorised by the 2008 South African Protocol. The protocol authorises and requires Australia to exchange information where the information relates to taxes administered by the Commissioner of Taxation [Article 25].
The 2008 South African Protocol provides for mutual assistance in collection of tax debts, which will allow one country to seek the assistance of the other country in collecting the first country's tax debts in certain circumstances. In the case of Australia, the Australian Taxation Office can, therefore, seek assistance from the South African tax authorities to collect Australian tax debts [Article 25A].
What to read/do next
More information relating to this and other Australian tax treaties can be found on the Treasury website
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