Thesis (M.Com. (Taxation))--University of the Witwatersrand, Faculty of Commerce, Law and Management, School of Accountancy, 2014. / With the international platform for cross border investment and economic development growing year on year at a steady pace, it has become apparent that bilateral income tax treaties do not always operate effectively in multilateral tax situations. Global transactions involving more than two states are certainly not uncommon and it could be said that the most fundamental issue in international taxation is double taxation resulting from the taxing rights of different tax jurisdictions that ‘overlap’ with regard to, generally speaking, one taxpayer or one declared income stream. Multilateral tax situations, commonly known as triangular cases, occur where tax incidence on a particular stream of income is triggered in three countries. These situations typically arise where a person who is a tax resident in two respective countries for tax purposes (a dual resident), or a person who is a tax resident in one country and has a permanent establishment in another, is earning revenue of which the source is in a third country. Taxing rights and jurisdictions of the three countries involved could potentially be in conflict with each other and therefore such situations may bring about lawful international triangular taxation or double taxation which will inevitably discourage enterprises from continuing investment and development internationally. Broad multilateral treaties in the income tax arena are not common1, and most treaties are still of a bilateral nature, i.e. generally addressing tax scenarios where only two specific countries are involved. The Organisation for Economic Cooperation and Development’s (’the OECD’)Model Tax Convention states this: There are no reasons to believe that the conclusion of a multilateral tax convention involving all Member countries could now be considered practicable. The Committee therefore considers that bilateral conventions are still a more appropriate way to ensure the elimination of double taxation at the international level.2

Les organismes de placement collectif (OPC) permettent aux investisseurs d'avoir accès à une gestion professionnelle, à la diversification, aux économies d'échelle, à un réinvestissement efficient des revenus et à la liquidité. Les formes juridiques et les systèmes fiscaux des OPC peuvent varier considérablement d'une juridiction à une autre. L'objet de cette thèse est de voir si les investisseurs dans un OPC sont dans la même situation dans laquelle ils se seraient trouvés s'ils avaient investi directement. Contrairement à un contexte national, les investisseurs de portefeuille transfrontaliers ne sont pas placés dans la même situation dans laquelle ils se seraient trouvés si le revenu de placement était réalisé directement. En effet, l'investissement transfrontalier en valeurs mobilières est entravé par des obstacles fiscaux résultant des retenues à la source et des lacunes actuelles de l'allégement conventionnel, en particulier en ce qui concerne les OPC. Afin d'assurer une plus grande sécurité fiscale aux OPC et à leurs investisseurs, diverses solutions possibles à ces difficultés ont alors été abordées. Il a été souligné qu'il faudrait améliorer les conventions de double imposition et les systèmes d'allègement conventionnel en octroyant les avantages soit au niveau de l'OPC soit au niveau de leurs investisseurs. Des perspectives sont également offertes par les règles de non-discrimination en vertu du droit de l'UE à travers notamment les initiatives de la Commission européenne et la jurisprudence de la CJUE. Ces perspectives permettent de suggérer que les États devraient rechercher un accord multilatéral pour abolir les retenues à la source sur les dividendes dans l'État de la source du revenu lorsqu'il est payé à des OPC établis dans d'autres États. Idéalement, tout accord visant à abolir les retenues à la source devrait être combiné à un système d'échange automatique d'informations. Il a été souligné que les inefficacités fiscales favorisent l'innovation financière tels que les produits dérivés et autres instruments financiers qui sont largement utilisés par les gestionnaires d'actifs comme une alternative pour éviter la retenue à la source sur les dividendes. / Collective investment vehicles (CIVs) permit investors to obtain access to professional management, diversification, economies of scale, efficient reinvestment of income and liquidity. The legal forms and tax structures of CIVs may vary considerably from one jurisdiction to another. The purpose of this thesis is to see if CIV investors are in the same position in which they would have been if they had invested directly.Unlike in a domestic context, cross-border portfolio investors are not placed in the same position as if investment income was realised directly. Indeed, cross-border investment in securities is hampered by tax obstacles resulting from withholding taxes and the current deficiencies of treaty relief, especially in relation to collective investment vehicles. In order to provide more certainty to CIVs and underlying investors, various possible remedies to those difficulties have been then addressed. It was highlighted that we should improve double taxation treaties and treaty relief systems by granting benefits either on OPC level either on the level of underlying investors. Perspectives are also offered by non-discrimination rules under EU law, especially through the EU Commission's initiatives and the ECJ cases law. Based on these prospects, it is submitted that the states should seek a multilateral agreement to abolish withholding taxes on dividends in the source state of income, when paid to CIVs established in another states. Optimally, any agreement to abolish withholding taxes should be combined with an automatic exchange of information system. We pointed out that tax inefficiencies promote financial innovation such as derivatives and other financial instruments which are widely used by asset managers as alternatives to avoid dividend withholding tax.

Multinational enterprises are continuously in search of investment opportunities to grow their businesses. For over two decades South Africa, being one of the economic powerhouses of Africa, has been one such target for global investors. A company planning to invest in South Africa will attempt to identify the most appropriate way to do so, for tax and non-tax reasons. However, tax consequences are one of the main factors influencing the decision of an investor. While certain companies choose to invest directly into the target country, the majority choose to set up a holding company outside of the investor country. Such a company is known as an intermediary holding company and is defined as a company which is interposed between a shareholder and its foreign subsidiary. The main purpose of this study is to investigate the best manner, for tax purposes, in which a foreign company would invest into South Africa, either directly or indirectly through an intermediary holding company. Should the intermediary holding company option be selected, the company will then need to select the country in which to base its intermediary holding company. Tax havens are commonly used as a base for intermediary holding companies, however, these may not be the most advantageous option in all cases. Literature on intermediary holding companies and tax havens is reviewed and thereafter the study analyses and compares the tax efficiency of a hypothetical UK company investing into South Africa using different options. The options available to the UK Company which are compared, include investing directly into South Africa or investing indirectly through an intermediary holding company based in either Cyprus, Mauritius or the Netherlands, all of which are commonly used as bases for intermediary holding companies. The comparative study on the different intermediary holding company options is performed based on the domestic tax laws of each country as well as the effects of the double tax agreements in force between these countries and other tax jurisdictions. Thereafter, the most tax efficient intermediary holding company option is compared to the tax efficiency of direct investment by the UK Company and a conclusion is reached on which is the best manner for such a company to invest into South Africa, for tax purposes. AFRIKAANS : Multi-nasionale ondernemings is voortdurend op soek na nuwe beleggingsgeleenthede ten einde besigheidsgroei te bewerkstelling. Internasionale beleggers sien Suid-Afrika nou al vir meer as twee dekades as ʼn toetreepunt tot geleenthede in Afrika, vanweë Suid-Afrika se status as een van die ekonomiese reuse in Afrika. Maatskappye wat beplan om in Suid-Afrika te belê sal ondersoek doen om die beste moontlike beleggings manier te vind. Talle besigheidsredes, waarvan belastingimplikasies een van die hoofoorwegings is, sal die faktore wees wat ʼn potensiële belegger se besluitneming beïnvloed. Terwyl sommige maatskappye verkies om direk in die beleggingsland te belê sal die meeste maatskappye eerder in ʼn houermaatskappy buite die beleggingsland belê. So ʼn maatskappy staan bekend as ʼn intermediêre houer maatskappy en word gedefinieer as ʼn “tussenganger” maatskappy wat as geleibuis optree tussen die aandeelhouer en die buitelandse filiaal. Die hoofdoel van hierdie studie is om ondersoek in te stel na die beste metode, vanuit ʼn belastingoogpunt, vir ʼn buitelandse maatskappy om in Suid-Afrika te belê. Dit kan óf direk óf indirek deur middel van ʼn intermediêre houer maatskappy gedoen word. Indien die intermediêre houer maatskappy opsie gekies word, moet die maatskappy ook die land kies waarin die intermediêre houer maatskappy opgerig gaan word. Lande wat bekend is as belastingtoevlugsoorde word dikwels gekies om intermediêre houer maatskappye op te rig. Dit is egter nie in alle gevalle die mees voordeligste metode nie. Literatuur oor intermediêre houer maatskappye en belastingtoevlugsoorde word nagevors, waarna hierdie studie die belastingeffektiwiteit van ʼn hipotetiese Britse maatskappy, wat in Suid-Afrika belê, ondersoek deur gebruik te maak van verskillende opsies. Die opsies wat beskikbaar is en ondersoek sal word sluit in, direkte belegging in Suid-Afrika en belegging deur van ʼn intermediêre houer maatskappy gebruik te maak in Cyprus, Mauritius of Nederland. Al die vooraf genoemde lande is algemeen bekend daarvoor dat dit gebruik word om intermediêre houer maatskappye op te rig. Die verskillende intermediêre houer maatskappy opsies word met mekaar vergelyk, deur die belastingimplikasies van plaaslike belastingwetgewing van elke land, asook enige dubbele belastingooreenkomste van krag tussen hierdie lande en ander regsgebiede, te oorweeg. Die mees effektiewe intermediêre houer maatskappy opsie word dan vergelyk met die belastingeffektiwiteit van direkte belegging deur die Britse maatskappy. ʼn Gevolgtrekking word gemaak oor die metode wat die mees effektiefste belastinggevolge inhou vir ‘n Britse maatskappy wat in Suid-Afrika belê. / Dissertation (MCom)--University of Pretoria, 2012. / Taxation / unrestricted