Editorial

• Author: Des Kruger Kruger
• DOI: 10.10520/ejc-btclq_v13_n2_a1
• Published date: 01 June 2022
• Date: 01 June 2022
• Pages: v-vii

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© Siber ink

Editorial

DES KRUGER*

As is usual, this edition contains articles dealing with very disparate and

interesting issues.

* * *

The f‌irst article is by Robyn Berger and Esther Geldenhuys of Bowmans

Attorneys and deals with a current and real dilemma facing companies

that have Dutch and Swedish shareholders, namely should dividends tax

be accounted for on dividends distributed to such shareholders. Dutch and

Swedish corporations holding 10% or more of the shares in a South African

company (qualifying shareholders) may currently receive dividends

without any dividends tax being withheld. This is because the respec-

tive double taxation agreements (DTA) concluded with South Africa each

contain a ‘most favoured nation’ (MFN) clause in respect of dividends tax

that in present circumstances results in South Africa being prohibited from

imposing any dividends tax.

In a case heard by the Tax Court in Cape Town on 12 June 2019 the

appeal by a Dutch taxpayer against an assessment for dividends tax was

upheld and the application of the MFN clause in the DTA concluded

between the Netherlands in South Africa (Dutch DTA) was conf‌irmed

as being operative in these specif‌ic circumstances. It was clear from the

arguments made by SARS in the Tax Court judgment that South Africa

would lose a signif‌icant amount of tax revenue on the application of the

MFN clause if the judgment was left to stand. Therefore, on 1 April 2021,

the South African Government f‌inally entered into a protocol to the DTA

between South Africa and Kuwait (Kuwaiti Protocol), which is at the root

of the ‘problem’. While signed, the Protocol has not yet come into opera-

tion as it still needs to be off‌icially ratif‌ied. Alarmingly, it seems that SARS

actually intends for the Kuwaiti Protocol to have retroactive effect.

This article deals with the current status of the MFN clause, considers

the Tax Court judgment and another case dealing with retroactive tax

legislation, and emphasises the current open questions which include the

following:

• South African companies wanting to declare dividends to their quali-

fying shareholders are asking whether dividends tax should be withheld

on those dividends.

• South African companies that in the past declared dividends to their

qualifying shareholders and withheld dividends tax thereon, are ques-

* Consultant, Webber Wentzel; Adjunct Professor, Department of Commercial Law,

University of Cape Town.