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Tax Treaties Impact on South African Investments

Explore the significance of tax treaties with the UK, Ireland, Sweden, and others on cross-border investments and trade flows in South Africa. Learn about investment trends and trade relations between these countries.

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Tax Treaties Impact on South African Investments

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  1. Preliminary Hearings: Tax Treaties with the United Kingdom, Ireland, Sweden, Oman, Cyprus, Kuwait, Malta, Seychelles, Malawi. Portfolio Committee on Finance 10 March 2010 Tax Policy Unit :National Treasury

  2. General purpose of tax treaties Policy • Promote economic growth by providing certainty to cross border investments • Prevent double taxation of the same income through: • Certainty of tax treatment • Assignment of taxing rights between the two treaty countries Administration • Exchange of information • Mutual Agreement Procedure

  3. Reasons for these tax treaty protocols • Proposed changes to the current tax treaty are necessary as a result of key changes to South African Domestic Tax legislation : Conversion of Secondary tax on Companies (“STC”) to a dividends tax at shareholder level; • Implementation of the proposed STC conversion is subject to renegotiation of nine tax treaties, having a zero rate withholding tax on dividends; • These included Australia, Cyprus , Ireland, Malta, Oman, Seychelles, Sweden, United Kingdom; • These tax treaties have a zero rate withholding tax on dividends • The renegotiation also addressed certain aspects that are not present in the old treaties; • The Australian tax treaty protocol was ratified and signed in March 2008 and is now in operational; • Malawi tax treaty was a renegotiation of the old tax treaty

  4. SA/United Kingdom (“UK”) Tax Treaty-Investment Flows • Investment by the UK • Total investments by the UK into South Africa were: • R558 billion in 2005 • R793 billion in 2006 • R 894 billion in 2007 • Major UK investors in South Africa include Panasonic, BP, Unilever, The Virgin Group, BAE Systems, Cadbury Schweppes, The Barclays Group, Xstrata, Shell etc. • Investment by South Africa • Total investments by South Africa into UK were: • R440 billion in 2005 • R479 billion in 2006 • R517 million in 2007 • South African companies operating in the UK: Anglo Platinum, Aveng Ltd, Dimensions Data, First Rand, Netcare Holdings, Sasol Ltd, Old Mutual, SAB Miller, Standard Bank, Steinhoff Ltd, Sanlam, Sappi Ltd etc • UK is one of South Africa’s largest trading partners

  5. SA/UK Tax Treaty-Trade Flows • Exports to the UK • Exports to UK were: • R32, 3 billion in 2005 • R31, 7 billion in 2006 • R34, 6 billion in 2007 • R 40.1 billion in 2008 • Main exports: minerals, metals, and agricultural products (such as vegetables products, animal products, grapes, wine of fresh grapes including fortified wine, fresh or chilled fish) etc • Imports to UK • Imports to UK were: • R20 billion in 2005 • R23 billion in 2006 • R27, 2 billion in 2007 • R34, 7 billion in 2008 • Main imports: Turbo –Jest, Turbo-Propellers and gas turbines, electrical motors, and generators; self-propelled bulldozers; angle dozers; graders; levelers; printing etc

  6. SA/Ireland Tax Treaty-Investment Flows • Investment by Ireland • Total investments by Ireland into South Africa were: • R1,5 billion in 2005 • R1,9 billion in 2006 • R2, 4 billion in 2007 • Irish companies or representative offices operating in South Africa include Independent News and Media; Guinness; Spectra Group; Howard Holdings; ESB International; etc • Investment by South Africa • Total investments by South Africa into Ireland were: • R33, 4 billion in 2005 • R45, 4 billion in 2006 • R51, 4 billion in 2007 • South African companies or representative offices operating in Ireland include AECI Ltd; Alexkor; Anglo Platinum; Coronation; Dimension Data, Datatec; Sasol Ltd, Investec; Old Mutual; SABMiller; Sappi Ltd etc, etc.

  7. SA/Ireland Tax Treaty: Trade Flows • Exports to Ireland • Exports from South Africa to Ireland were: • R1,1 billion in 2005 • R1,1 billion in 2006 • R1, 3 billion in 2007 • R 1, 7 billion in 2008 • Main exports: base metals, machinery, mechanical and electrical appliances, base metals, mineral products etc • Imports from Ireland • Imports from Ireland to South Africa were: • R4 billion in 2005 • R4, 3 billion in 2006 • R5, 6 billion in 2007 • R7, 1billion in 2008 • Main imports: works of art, collector’s pieces & antiques, vegetable product, plastics &articles, live animals, animal products, wood, wood charcoal, natural or cultured pearls, raw hides & skins, leather, fur skins, umbrellas, headgear etc

  8. SA/Sweden Tax Treaty- Investment Flows Investment by Sweden: • Total investments by Sweden in South Africa were: • R3,1 billion in 2005 • R3, 8 billion in 2006 • R3,5 billion in 2007 • Swedish companies or representative offices operating in South Africa include: Atlas Copco, Electrolux, Ericson, Volvo, Scania, Svedala, Tetra Pak, Sandvik etc • Investment by South Africa: • Total investments by South Africa into Sweden were: • R991 million in 2005 • R1, 4 billion in 2006 • R1, 3 billion in 2007 • South African companies or representative offices operating in Sweden include: Dimensions Data; Tiger Wheels; Sappi etc.

  9. SA/Sweden Tax Treaty-Trade Flows • Exports to Sweden: • Exports from South Africa to Sweden were: • R1, 5 billion in 2005 • R2, 9 billion in 2006 • R2, 9 billion in 2007 • R3,4 billion in 2008 • Main Exports: Win of Fresh Grapes; Citrus and dried fruit; Safety Fuses; Grapes; Machinery; Aluminum Waste and Scrap; Fish etc • Imports from Sweden: • Imports from Sweden to South Africa were: • R4, 8 billion in 2005 • R5, 8 billion in 2006 • R8, 1 billion in 2007 • R10 billion in 2008 • Main Imports: Motor Cars; Fork Lifts Trucks; Paper and paperboard; Plates; Dishwashing Machines; Generators etc

  10. SA/Kuwait Tax Treaty- Investment Flows Investment by Kuwait: • Total investments by Kuwait in South Africa were: • R 2 million in 2006 • R 763 million in 2007 • R1 million in 2008 • Kuwait companies or representative offices in South Africa include: IFA Hotels and Kuwait Group (Zimbali Lodge);Kapico South Africa; Sheraton Holt and towers; Oubaai Golf Estate ; Lombardy Estate; Legend Golf and Safari Resort , Boschedndal Estate etc • Investment by South Africa: • Total investments by South Africa in Kuwait were: • R 1 million in 2006 • R161 million in 2007 • R 24 million in 2008 • South African companies or representative offices in Kuwait include: Datatec Ltd; Murray and Roberts; Sasol Ltd

  11. SA/Kuwait Tax Treaty-Trade Flows • Exports to Kuwait: • Exports from South Africa to Kuwait were: • R306 million in 2005 • R193 million in 2006 • R286 million in 2007 • R 1, 6 billion in 2008 • Main exports: Chemical products; Transport equipment; Animal products; Base Metals; Pulp, wood, Paper Products; Machines for cleaning etc • Imports from Kuwait: • Imports from Kuwait to South Africa were: • R 314 million in 2005 • R130 million in 2006 • R8, 8 million in 2007 • R284 million in 2008 • Main imports: Petroleum Oils; Minerals or chemical fertilizers; Plaster, Cement, Artworks; Shawls; Scarves etc

  12. SA/Malta Tax Treaty- Investment Flows Investment by Malta: • Total investments by Malta in South Africa were: • R 38 million in 2006 • R40 million in 2007 • R1,3 million in 2008 • Investment by South Africa: • Total investments by Malta in South Africa were: • R 19 million in 2006 • R6 million in 2007 • R15 million in 2008 • Major investments by SA companies in Malta include: • Illovo Sugar Ltd; AngloGold Ashanti; Dimension Data etc

  13. SA/Malta Tax Treaty- Trade Flows • Exports to Malta: • Exports from South Africa to Malta were: • R 10, 6 million in 2005 • R 56, 7 million in 2006 • R 33, 9 million in 2007 • R 31, 9 million in 2008 • Main exports: chemical products, machinery and mechanical appliances, base metals, animal products, etc • Imports from Malta • Imports from Malta to South Africa were: • R30, 1 million in 2005 • R 37, 6 million in 2006 • R 80, 8 million in 2007 • R118 million in 2008 • Main imports: chemical products, plastic products, transport equipment, machinery, paper products, etc

  14. SA/Cyprus Tax Treaty- Investment Flows Investment by Cyprus: • No records of investment flows • Investment by South Africa: • No records of investments

  15. SA/Cyprus Tax Treaty-Trade Flows • Exports to Cyprus: • Exports from South Africa to Cyprus were: • R50 million in 2005 • R106 million in 2006 • R65 million in 2007 • R 79 million in 2008 • Main exports: Automatic data Processing machines; Wine; Fruit Juices; Tyres; Wire of Iron or Non-Alloy Steel; petroleum Jelly etc • Imports from Cyprus: • Imports from Cyprus to South Africa were: • R 17, 8 million in 2005 • R19, 4 million in 2006 • R16, 2 million in 2007 • R 19, 8 million in 2008 • Main imports: Fishing Vessels; factory Ships; Salt; Toilet paper; Cigars; Coffee; Spectacles; Trunks; Suitcases etc

  16. SA/Oman Tax Treaty- Investment Flows Investment by Oman: • Total investments by Oman in South Africa were: • R3 million in 2006 • R2 million in 2006 • R1 million in 2007 • Investment by South Africa: • Total investments by South Africa in Oman were: • R1 million in 2006 • R9 million in 2006 • R1 million in 2007 • Major investments by SA companies in Oman include: Sasol Ltd; Datatec; Murray and Roberts etc

  17. SA/Oman Tax Treaty-Trade Flows • Exports to Oman: • Exports from South Africa to Oman were: • R180 million in 2005 • R480 million in 2006 • R327 million in 2007 • R495 million in 2008 • Main exports: Citrus Fruit; House Hold Furniture; Grapes; Apples; Wine of Fresh Grapes; Sugarconfectionary etc • Imports from Oman: • Imports from Oman to South Africa were: • R 792 million in 2005 • R1, 3 million in 2006 • R2, 9 billion in 2007 • R 1, 2 billion in 2008 • Main imports: Perfumes and Toilet Waters; Antibiotics; Chromium Ores and Concentrates; Self –Adhesive Plates; Bread; Pastry etc

  18. SA/Seychelles Tax Treaty- Investment Flows Investment by Seychelles: • Total investments by Seychelles in South Africa were: • R29 million in 2006 • R31 million in 2007 • R 30 million in 2008 • Investment by South Africa: • Total investments by Seychelles in South Africa were: • R72 million in 2006 • R77 million in 2007 • R 134 million in 2008 • Major investments by South Africa companies in Seychelles include: SAA; Bidvest group; Pam Golding; Trans Hex Group; United Resorts and Hotels etc • SADC member State

  19. SA/Seychelles Tax Treaty-Trade Flows • Exports to Seychelles: • Exports from South Africa to Seychelles were: • R597 million in 2005 • R502 million in 2006 • R407 million in 2007 • R472 million in 2008 • Main exports: Wood; Yachts; Fruit Juices; Machinery; Maize (Corn); Insecticides; Wine; Citrus Fruit; Dried Fruit etc • Imports from Seychelles: • Imports from Seychelles to South Africa were: • R 17 million in 2005 • R15, 2 million in 2006 • R45 million in 2007 • R 3, 7 million in 2008 • Main imports: Flour; Coconuts; Fish; Beer Made from Malt; Umbrellas etc

  20. Reasons For SA / Malawi New Tax Treaty • Renegotiation of the old tax treaty; • First tax treaty between South Africa and the Malawi came into force on 2 September 1971 • During that time, South Africa was still on source based system of taxation and did not have capital gains tax system

  21. SA/Malawi Tax Treaty- Investment Flows Investment by Malawi: • Total investments by Malawi in South Africa were: • R122 million in 2006 • R199 million in 2007 • R155 million in 2008 • Investment by South Africa: • Total investments by South Africa in Malawi were: • R161 million in 2006 • R214 million in 2007 • R303 million in 2008 • Major investments by South Africa companies in Malawi include: Nedbank; Cashbuild; Alexander Forbes; AD Corp Holdings; Bell Equipment; Massmart; Illovo Sugar Ltd; The Bidvest Group; SAA; Bleu Financial Services Etc

  22. SA/Malawi Tax Treaty-Trade Flows • Exports to Malawi: • Exports from South Africa to Malawi were: • R1, 5 billion in 2005 • R1, 6 billion in 2006 • R2, 1 billion in 2007 • R3, 8 billion in 2008 • Main exports: Mineral or chemical Fertilizers; Motor Vehicles; Tractors; Petroleum Jelly; Maize; Refrigerators etc • Imports from Malawi: • Imports from Malawi to South Africa were: • R 455 million in 2005 • R531 million in 2006 • R647 million in 2007 • R971 million in 2008 • Main imports: Cotton; Natural Rubber; Pepper of Genus Pepper; Nuts ; Fruit; Rice; Blankets ; Sunflower Seeds etc

  23. THANK YOU

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