This treatise tests the effectiveness of withholding taxes imposed by the South African tax authorities with respect to amounts paid from a South African source to a non-resident in respect of interest, royalties and foreign entertainers and sportspersons. The first research objective discusses the alignment of the meaning of words and phrases in both the domestic law of South Africa and Double Tax Agreements (DTA.) The second issue outlines whether the DTA supports the domestic law through the waiving of tax claims in favour of the country of source. In last instance the attribution of income is discussed. The interpretation attached to the words for the purpose of levying normal tax, serves as the methodology for identifying inconsistencies with the levying of withholding tax. The wider scope of withholding taxes with respect to the meaning of ‘interest’, ‘royalties’ as well as ‘foreign entertainer and sportsperson’ misaligns with the corresponding meaning of it in the DTA. This creates the risk that amounts paid to non-residents will either not be subjected to withholding tax in the source state or that the income will be taxable in the resident state as a result of the application of other articles of the DTA. DTA’s concluded between South Africa and other countries are based on the OECD Model Tax Convention. These DTA’s tend to favour the residence state with respect to the waiving of tax claims. The source state’s right to collect withholding tax on income from royalties and interest is prevented if the foreign person is physically present in South Africa for more than 183 days and if the interest/royalty payment is effectively connected with a permanent establishment in South Africa. The domestic law and DTA are misaligned with respect to the attribution of interest and royalty income since the recipient of the income for the purpose of the domestic law is not necessarily the beneficial owner of the debt claim or intellectual property. It can therefore be recommended that South Africa must renegotiate DTA’s to favour taxation in the source state. Withholding tax provisions must also be redrafted to align them with the DTA meaning.
| Identifer | oai:union.ndltd.org:netd.ac.za/oai:union.ndltd.org:nmmu/vital:29473 |
| Date | January 2017 |
| Creators | Van der Merwe, de Vos Wouter |
| Publisher | Nelson Mandela Metropolitan University, Faculty of Business and Economic Sciences |
| Source Sets | South African National ETD Portal |
| Language | English |
| Detected Language | English |
| Type | Thesis, Masters, MCom |
| Format | 85 leaves, pdf |
| Rights | Nelson Mandela Metropolitan University |
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