A research report submitted to the Faculty of Commerce, Law and
Management, University of the Witwatersrand, Johannesburg, in partial
fulfilment of the requirements for the degree of Master of Commerce
(specialising in Taxation)
Johannesburg, 2015 / The Katz Commission recognised that South Africa could benefit from multinational
enterprise (MNE) groups headquartering in South Africa. MNE headquarter
companies create jobs and attract highly skilled individuals who impact on the
economies in which they reside. These highly skilled individuals are also high
taxpayers in the countries where they provide their services.
South Africa has a number of attributes which would encourage MNE groups to
headquarter in South Africa but the cost of doing business with the rest of Africa is
high due to withholding taxes levied by African countries on technical and
management fees. Countries with low tax rates attract MNE groups to headquarter in
those countries as this effectively reduces the cost of doing business with the rest of
Africa. The National Treasury introduced section 6quin of the Income Tax Act to
provide effective relief to the South African taxpayer from double taxation on South
African-sourced service fees charged to other countries and, in particular, other
African countries.
An examination is conducted on the impact of double taxation and whether section
6quin provides more effective relief from double taxation compared to other double tax
relief mechanisms available to the South African taxpayer which will incentivise MNE
groups to headquarter in South Africa. An analysis is performed on the income tax
forfeited by the South African Receiver of Revenue (SARS) in the National Treasury
providing this incentive to South African headquarter companies compared to if the
headquarter is relocated out of South Africa.
The results indicate that section 6quin provides a feasible solution to reducing double
taxation on South African-sourced services provided to other African countries which
incentivises MNE groups to headquarter in South Africa. If section 6quin is withdrawn
from the South African Income Tax Act, MNE groups potentially will not headquarter
in South Africa and seek low tax jurisdictions to reduce costs of providing headquarter
services into Africa. This study indicates that the fiscus stands to lose more income
tax if the MNE group headquarters outside of South Africa compared to the relief
provided to the MNE group headquarter company in accordance with section 6quin by
reducing income tax payable.
This study informs MNE groups seeking to headquarter in South Africa and the
National Treasury of the effects of double taxation on South African-sourced services
provided to other African countries and the requirement for relief against double
taxation.
This study highlights the need for the National Treasury to retain section 6quin in the
Income Tax Act or provide an alternate suitable solution to reducing double taxation
on South African-sourced services provided by South African headquarter companies
to other African countries. / MT2017
| Identifer | oai:union.ndltd.org:netd.ac.za/oai:union.ndltd.org:wits/oai:wiredspace.wits.ac.za:10539/22158 |
| Date | January 2016 |
| Creators | Statham, Ian |
| Source Sets | South African National ETD Portal |
| Language | English |
| Detected Language | English |
| Type | Thesis |
| Format | Online resource (ix, 96 leaves), application/pdf |
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