What is a Dual Taxation Agreement?

Dual Taxation Agreements (“DTA”) are internationally agreed legislation between South Africa and another country. South Africa holds dozens of such agreements with various countries and the main purpose of a DTA is to ensure that each country subject to the agreement knows what taxing rights they hold against taxpayers.

A DTA ensures that a taxpayer is not unfairly taxed in both South Africa and the corresponding country dealt with in any specific DTA. It thus provides a defence to double taxation and sets out various requirements a taxpayer must meet to understand where that taxpayer falls as a tax resident.

Dependent on where a taxpayer falls as a tax resident, taking into account the DTA, will determine where the taxpayer must pay certain types of taxes on income received.

Who does a DTA apply to?

A DTA becomes relevant to a taxpayer’s circumstances if that taxpayer is earning an income for instance in South Africa as well as abroad, or if that taxpayer is a tax resident of South Africa (but has no income from a South African source) and is earning income from a foreign source.

This type of situation often gives rise to a grey area as to where a person can or should be taxed, especially taking into account that a South African tax resident is subject to tax in South Africa on its worldwide income.

Thus, many South African’s living and working abroad may need to consider what their tax treatment legally should be when taking into account the DTA between South Africa and the country they are now residing in. There is the possibility that a taxpayer may need to pay tax on their foreign income in South Africa and utilising a DTA may be an option to ensure this does not happen.

Please Note: Not all countries have a DTA with South Africa. Click here for the full list of countries.

How do we help?

We assist clients that may fall into this area, and where Financial Emigration is not an option as they do not fit the requirements. We assess a client’s circumstances as well as the DTA that would apply to them and thereafter draft a legal tax opinion which provides precise clarity on where the client falls in terms of taxing liability. This opinion can then be used in conjunction with an argument to SARS should they disagree with your tax position as a non-tax resident in terms of a DTA.