Financial Management of Parliament Bill

The National Treasury and SARS recently presented to the Parliamentary Portfolio Committee on Finance the Draft Financial Management of Parliament Bill: finalisation and the Double Tax Agreement with Netherlands: for approval for Ratification by the Treasury and by SARS (both bodies had separate presentations prepared).

Double Tax Convention and Protocol with The Netherlands: National Treasury (NT) And South African Revenue Services (SARS) briefings and requests to ratify
Ms Yanga Mputa, Director: Tax Policy Unit, National Treasury, briefed the Committee on the request for ratification of the tax treaty with the Netherlands.

She took the Committee through the treaty ratification process. She explained that before any tax treaty could come into force, it had to be ratified by Parliament. This particular Treaty was the renegotiation of an existing tax treaty.

The first treaty between South Africa and the Netherlands came into force on 20 January 1972. The revised tax treaty signed on October 2005 would terminate that previous tax treaty. It had been ratified already by the Netherlands, but South Africa delayed ratification pending renegotiation of the article dealing with the taxation of dividends, due to the proposed changes to South African domestic tax legislation, particularly the conversion of Secondary Tax on Companies (STC) to a dividend tax at shareholder level. The revised tax treaty also addressed certain aspects that were not present in the old treaty.

She also reported the figures for the investment flows and trade flows between South Africa and the Netherlands.Mr Ron van der Merwe, Senior Manager: International Treaties, South African Revenue Services (SARS) discussed the technical provisions of the tax treaty.

The purpose of these agreements was to remove barriers to cross border trade and investment. This was done by eliminating the possibility of double taxation, creating certainty of tax treatment, reducing withholding tax rates, dealing with exchange of information between authorities, assisting in tax collection, the resolving of disputes and ensuring consistent interpretation.

As background, he outlined the ways in which treaties removed tax barriers.
His presentation consisted of two parts:

• The Ratification of the South Africa – Netherlands Double Taxation Convention and
• the Ratification of the South Africa – Netherlands Protocol amending the Double Taxation Convention.

The Ratification of the South Africa – Netherlands Double Taxation Convention
This part referred to the original agreement signed in 2005. The treaty closely followed the Organisation for Economic Co-operation and Development (OECD) Model Convention, which formed the foundation for the vast majority of Double Taxation Agreements (DTAs) worldwide. A number of the articles were different from the normal South African approach .