S.I. No. 478/1997 - Double Taxation Relief (Taxes on Income and Capital Gains) (Republic of South Africa) Order, 1997

1. Concerning Article 10 it is understood that dividends arising in South Africa or Ireland are not subjected to tax. Should there be any change in these systems, the Contracting States will reconsider the provisions of that Article at the request of either State.

2. With reference to paragraph I of Article 23 of the Convention it is understood that

(

a

) if following the signature of the Convention, the laws of South Africa should change to permit the taxation of dividends from sources outside South Africa and the allowance for relief against South African tax on dividends received in South Africa of tax of another country on the profits out of which the dividends are paid, then it shall immediately notify Ireland and enter into a renegotiations of this Convention to allow similar relief in respect of Irish tax on profits out of which dividends are received in South Africa;

(

b

) the South African secondary tax on companies is a tax on the income of the periods for which the tax is paid.

3. Notwithstanding paragraph 2 of Article 24, South Africa may impose on the profits attributable to a permanent establishment in South Africa of a company which is a resident of Ireland a tax at a rate which does not exceed the rate of normal tax on companies resident in South Africa by more than five percentage points.

IN WITNESS WHEREOF the undersigned, being duly authorised thereto, have signed this Protocol.

DONE at Pretoria in duplicate, this 7th day of October, 1997.

EAMONTUATHAIL

GILL MARCUS

For the Government of Ireland

For the Government of the Republic of South Africa

GIVEN under the Official Seal of the Government, this 2nd day of December, 1997.

BERTIE AHERN,

Taoiseach.

EXPLANATORY NOTE

This Order gives the force of law to the Convention with the Republic of South Africa which is set out in the Schedule. The effect of the Convention is summarised below.

In many cases, the Convention awards a taxation right over items of income and gains to the country of residence of the recipient only. Examples include dividend, interest and royalty income, business profits and gains on movable property, provided neither arises through a permanent establishment or fixed base in the country of source, and profits from the operation (including leasing) of ships or aircraft engaged in international traffic. In other cases, such as remuneration in respect of services rendered to the Government of either country, the Convention awards a taxation right to the state of source only.

Where both countries continue to have taxing rights, for example in the case of business profits arising through a permanent establishment which a person resident in one country has in the other country or in the case of capital gains arising from the disposal of immovable property or shares linked with immovable property, the Convention provides that the country of residence of the recipient of the income or gain will give credit against its tax on the income or gains for tax paid in the other country on the same income or gains.

A significant feature of the Convention is its recognition of a number of tax incentives which South Africa has introduced to further its economic development. Subject to a number of conditions and restrictions, including a maximum period of ten years, 75% of dividend income paid by a South African company to an Irish direct investor out of profits which are relieved from tax in South Africa under specified incentives, will also be linked to the continuation by South Africa of its territorial system of taxation which exempts foreign dividends from tax in South Africa. This effectively preserves the benefits of Irish tax incentives for South African investors.

The Convention also provides for safeguarding nationals and enterprises of one country against discriminatory taxation in the other country, for consultation between the competent authorities of the two countries for the purpose of resolving any difficulties or doubts arising as to the interpretation or application of the Convention and for the exchange of such information between these authorities as is necessary for carrying out the provisions of the Convention or of the domestic law of either state in relation to the taxes covered by the Convention.

The Convention will enter into force following ratification by each country in accordance with its constitutional procedures. It will thereupon have effect in respect of withholding taxes, from the first of January in the following year and, in respect of other taxes, for tax periods beginning or on after the first of January in the following year. The Convention may be terminated by either state after 5 years from the date it enters into force, but at least six months prior notice must be given through diplomatic channels.

4. The competent authorities of the Contracting States may communicate with each other directly for the purpose of reaching an agreement in the sense of the preceding paragraphs.

ARTICLE 26

Exchange of Information

5. In this Article the term "taxation" means taxes which are the subject of this Convention.

ARTICLE 25

Mutual Agreement Procedure

6. (

a

) Where in accordance with the provisions of the laws of South Africa specified in subparagraph ( b ), provided that such provisions remain in substance unchanged after the date of signature of this Convention, the profits of an enterprise of South Africa are exempted from tax for the purpose of encouraging economic development in South Africa, dividends paid out of such profits by a company which is a resident of South Africa to a company which is a resident of Ireland and which controls directly or indirectly 10 per cent or more of the voting power in the company paying the dividends shall not be regarded as income for the purposes of taxation in Ireland to the extent of 75 per cent of the amount of such dividends.

(

b

) Section 37H of the Income Tax Act (Act No. 58 of 1962) as amended.

(c) The provisions of paragraph ( a ) shall cease to apply

(i) after 31 December 2009; or

(ii) after such earlier date, if any, as the taxation laws of South Africa are changed to permit the taxation in South Africa of dividends derived from a company resident in Ireland. In the event of such a change in the taxation laws, or of the publication of proposals to make such a change, Ireland shall, upon request from South Africa, enter into negotiations concerning the continuation of the provisions of this paragraph notwithstanding such change.

ARTICLE 24

Non-Discrimination

7. Where profits include items of income or gains which are dealt with separately in other Articles of this Convention, then the provisions of those Articles shall not be affected by the provisions of this Article.

ARTICLE 8

Shipping and Air Transport

S.I. No. 478 of 1997.

DOUBLE TAXATION RELIEF (TAXES ON INCOME AND CAPITAL GAINS) (REPUBLIC OF SOUTH AFRICA) ORDER, 1997

WHEREAS it is enacted by

section 361

(1) of the

Income Tax Act, 1967

(No. 6 of 1967), as amended by

section 86

of the

Finance Act, 1974

(No. 27 of 1974),

section 38

(1) of the

Capital Gains Tax Act, 1975

(No. 20 of 1975),

section 166

of the

Corporation Tax Act, 1976

(No. 7 of 1976), and

section 47

(4) of the

Finance Act, 1983

(No. 15 of 1983), that if the Government by order declare that arrangements specified in the order have been made with the government of any territory outside the State in relation to affording relief from double taxation in respect of income tax, corporation tax or capital gains tax and any taxes of a similar character, imposed by the laws of the State or by the laws of that territory, and that it is expedient that those arrangements should have the force of law, the arrangements shall, notwithstanding anything in any enactment other than

section 47

of the

Finance Act, 1983

, as amended, have the force of law

AND WHEREAS it is further enacted by section 361 (6) of the first-mentioned Act that where such an order is proposed to be made, a draft thereof shall be laid before Dáil Éireann and the order shall not be made until a resolution approving of the draft has been passed by Dáil Éireann

AN WHEREAS a draft of the following Order has been laid before Dáil Éireann and a resolution approving of the draft has been passed by Dáil Éireann

NOW, the Government, in exercise of the powers conferred on them by

section 361

(1) of the

Income Tax Act, 1967

(No. 6 of 1967), as amended by

section 86

of the

Finance Act, 1974

(No. 27 of 1974),

section 38

(1) of the

Capital Gains Tax Act, 1975

(No. 20 of 1975),

section 166

of the

Corporation Tax Act, 1976

(No. 7 of 1976), and

section 47

(4) of the

Finance Act, 1983

(No. 15 of 1983), hereby order as follows