Sars may have to refund some dividends tax payments

SA may have an unexpected hole in its dividends tax collections potentially going back several years. The SA Revenue Service may have to refund dividends tax payments historically made on dividends declared by SA companies to shareholders who are Dutch residents.

The original rate of dividends tax of 10% has been increased to 20%. However, these rates are subject to reduction in terms of the double-tax agreements that SA has concluded with many jurisdictions, including the Netherlands. The Netherlands DTA reads that if any double-tax agreement subsequently negotiated between SA and another country grants a lower rate of dividends tax than that contained in the Netherlands DTA, the lower tax rate will apply to residents of the Netherlands on dividends they receive from SA companies.

As the Netherlands has traditionally been one of the world’s favourite holding company regimes, Dutch shareholders of SA companies can potentially use the most favoured nation clause in the Netherlands DTA to demand that, since Swedish shareholders qualify for a 0% rate of dividends tax and since the Swedish double-tax agreement was entered into after the Netherlands DTA, such shareholders resident in the Netherlands are also entitled to a 0% withholding tax on dividends received from SA...

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