Double 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 that 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.
To correctly apply treaty relief on your foreign earned income, you will need to consider which country will actually have the right to tax your income. This is achieved through a measured approach, known as the tie-breaker test, and takes into consideration various factors such as if you have a tax residency certificate, where you have a permanent home, where your centre of vital interests are, i.e. where your family and economic ties are, as well as where your habitual abode is, to name a few.