DO ME A FAVOUR
a rate lower than that provided for in the Swedish protocol, such exemption or lower rate shall apply to dividends arising in SA and beneficially owned by a resident of Sweden.
The Swedish most-favoured nation protocol applies if any favourable dividends tax treatment is prescribed in “any” treaty or convention. There are no limits on when the favourable treaty or convention should have been concluded or entered into force.
As a result, SA’s entire treaty network should be assessed to determine whether there is any dividends tax treatment that is more favourable than that in the Swedish protocol.
To date, the relevant favourable treaty is the tax treaty between SA and Kuwait concluded on February 17 2004, entered into force on April 25 2006 and in respect of withholding taxes applies with effect from June 1 2006. The Kuwait treaty provides for exclusive residence state taxation of dividends. That is, for example, dividends paid by a company which is a resident of SA to a resident of Kuwait who is the beneficial owner of such dividends shall be taxable only in Kuwait. SA may therefore not tax dividends paid by a South African resident to a beneficial owner that is resident in Kuwait.
Given this beneficial dividends treatment in the Kuwait treaty, the same benefit can be claimed in respect of dividends paid by a South African resident to a beneficial owner that is resident in Sweden. As a result, because the Swedish treaty was concluded after the Dutch treaty, the same exclusive residence state taxation treatment can be claimed under the Dutch treaty.
The circular zero-tax treatment for dividends is activated in the Dutch treaty because the Swedish treaty was concluded on March 18 2012, a date following the conclusion of the Dutch treaty on July 8 2008. The effective