ABC Proprietary Limited v Commissioner for the South African Revenue Services (14287) [2019] ZATC 9; 82 SATC 144 (12 June 2019)

ABC Proprietary Limited v Commissioner for the South African Revenue Services (14287) [2019] ZATC 9; 82 SATC 144 (12 June 2019)

The court found that the wording of the double taxation agreements between South Africa and the Netherlands, Sweden, and Kuwait is clear and unambiguous. The MFN clause in the Netherlands DTA is triggered when South Africa affords more favourable treatment to another contracting state, regardless of whether such treatment arises from agreements concluded before or after the Netherlands DTA. The subsequent agreement with Sweden incorporated a provision that residents of Sweden would receive the same preferential treatment as any other contracting state, irrespective of timing. Since Kuwait already enjoyed a 0% tax rate on dividends, Sweden became entitled to the same, and by operation of...

Citation
[2019] ZATC 9
Parties
Appellant: ABC Proprietary Limited; Respondent: Commissioner for the South African Revenue Services
Court
Tax Court
Jurisdiction
South Africa
Judgment Date
12 June 2019
Case Number
14287
Procedural Posture
Tax Appeal / Final Judgment
Outcome
Appeal upheld. The appellant is not liable to pay dividends tax in South Africa on the dividends paid to its Netherlands shareholder.
Judges
Hack, B R Hilliard, Q S Joseph
Legal Topics
Double Taxation Agreements, Most Favoured Nation Clause, Income Tax Act, Treaty Interpretation, Dividends Tax, Parol Evidence Rule
Tax Law Commercial and Corporate Double Taxation Agreements Most Favoured Nation Clause Income Tax Act Treaty Interpretation Dividends Tax Parol Evidence Rule

Case Brief

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Parties

ABC Proprietary Limited

Appellant

Commissioner for the South African Revenue Services

Respondent

Procedural Posture

Tax Appeal / Final Judgment

Legal Issues

  1. 1 Whether the appellant is liable to pay dividends tax in South Africa on dividends paid to its Netherlands shareholder under the relevant double taxation agreement.
  2. 2 Whether the most favoured nation (MFN) clause in the South Africa-Netherlands DTA is triggered by more favourable treatment afforded to Kuwait and Sweden.
  3. 3 Whether the interpretation of the MFN clause should be restricted to future agreements only or include prior agreements.

Ratio Decidendi

The court found that the wording of the double taxation agreements between South Africa and the Netherlands, Sweden, and Kuwait is clear and unambiguous. The MFN clause in the Netherlands DTA is triggered when South Africa affords more favourable treatment to another contracting state, regardless of whether such treatment arises from agreements concluded before or after the Netherlands DTA. The subsequent agreement with Sweden incorporated a provision that residents of Sweden would receive the same preferential treatment as any other contracting state, irrespective of timing. Since Kuwait already enjoyed a 0% tax rate on dividends, Sweden became entitled to the same, and by operation of...

Court Disposition

Appeal upheld. The appellant is not liable to pay dividends tax in South Africa on the dividends paid to its Netherlands shareholder.

Orders

  • The respondent is ordered to refund to the appellant the amount of dividends tax overpaid in terms of section 64L of the Income Tax Act, Act 58 of 1962.
  • The respondent is ordered to pay to the appellant interest on the refunded amount calculated in accordance with sections 187, 188 and 189 of the Tax Administration Act, Act 20 of 2011 from the date the amount was paid until the date of repayment.