Promulgation of protocol to SA/Kuwait DTA

In 2019, the Tax Court in ABC Proprietary Limited v C: SARS (Case No. 14287) 82 SATC 144 held that the most favoured nation (“MFN”) article which is contained in the DTA between South Africa and the Netherlands, when read with the DTA between South Africa and Sweden, and the dividend article in the DTA between South Africa and Kuwait, results in the dividends withholding tax (“DWT”) rate being reduced from 5% to 0% of the gross amount of the dividends paid by a South African resident company to a Dutch company shareholder (assuming it is the beneficial owner of the dividend) which holds at least 10% of the capital in the company paying the dividend.

Government Gazette No. 51637 published on 22 November 2024 (“GG”) contains the protocol to the double tax agreement (“DTA”) between South Africa and Kuwait (“Protocol”). The GG states that in terms of paragraph 1 of Article 7 of the Protocol, the Protocol’s date of entry into force is 2 October 2024.

Now that the Protocol has entered into force, the 0% DWT rate referred to above will no longer apply in terms of the DTA between South Africa and the Netherlands but will revert to 5% in circumstances where a Dutch company holds at least 10% of the capital in the company paying the dividends.

Nicolette Smit

Executive | Tax

nsmit@ENSafrica.com

David Marais

Senior Associate | Tax

dmarais@ENSafrica.com