A Protocol amending the Agreement for the Avoidance of Double Taxation and Prevention of Fiscal Evasion with respect to Taxes on Income and on Capital between South Africa and Cyprus was signed on the 1st of April 2015.
According to the Protocol, Article 10 (“Dividends”) of the Double Tax Treaty shall be replaced with the provisions included in the Protocol signed. As such, dividends paid by a company resident in one contracting State to a company resident in the other contracting State shall be taxed in the latter. Nonetheless, withholding tax (“WHT”) shall be incurred in the first mentioned State at a rate of 5% in the case where the beneficial owner of the dividend holds at least 10% of the capital in the dividend paying company. In a different case, a 10% WHT shall be incurred on the gross amount of the dividends. It is also noted that the two contracting States shall by mutual agreement decide on the application of these limitations.
Article 26 (“Exchange of Information”) of the Treaty will also be replaced in order to include further clarifications in relation to the exchange of information process between the two States. More specific, the wording in paragraph 1 of the Article, is altered to clarify that the States will exchange as much information as is foreseeably relevant for carrying out the provisions of the Agreement, replacing the phrase “as much information is necessary”. The change is in line with the OECD Model Treaty and the Commentary, according to which States must exchange information to the widest possible extent but are not at liberty to engage in “fishing expeditions”. Additional paragraphs are also included to clarify that the State which receives an information exchange request shall use its internal processes to retrieve said information even if this is not necessary for its own domestic purposes.
The Protocol will enter into force as soon as the contracting States notify each other on the completion of the procedures required by their domestic legislation. Once the protocol enters into force it will constitute an integral part of the Agreement between the two States.