Preliminary Hearings Tax Treaties with the United Kingdom

Preliminary Hearings: Tax Treaties with the United Kingdom, Ireland, Sweden, Oman, Cyprus, Kuwait, Malta, Seychelles, Malawi. Portfolio Committee on Finance 10 March 2010 Tax Policy Unit : National Treasury

General purpose of tax treaties Policy • Promote economic growth by providing certainty to cross border investments • Prevent double taxation of the same income through: – Certainty of tax treatment – Assignment of taxing rights between the two treaty countries Administration • Exchange of information • Mutual Agreement Procedure 2

Reasons for these tax treaty protocols • Proposed changes to the current tax treaty are necessary as a result of key changes to South African Domestic Tax legislation : Conversion of Secondary tax on Companies (“STC”) to a dividends tax at shareholder level; • Implementation of the proposed STC conversion is subject to renegotiation of nine tax treaties, having a zero rate withholding tax on dividends; • These included Australia, Cyprus , Ireland, Malta, Oman, Seychelles, Sweden, United Kingdom; • These tax treaties have a zero rate withholding tax on dividends • The renegotiation also addressed certain aspects that are not present in the old treaties; • The Australian tax treaty protocol was ratified and signed in March 2008 and is now in operational; • Malawi tax treaty was a renegotiation of the old tax treaty 3

SA/United Kingdom (“UK”) Tax Treaty. Investment Flows • Investment by the UK • Total investments by the UK into South Africa were: – R 558 billion in 2005 – R 793 billion in 2006 – R 894 billion in 2007 • Major UK investors in South Africa include Panasonic, BP, Unilever, The Virgin Group, BAE Systems, Cadbury Schweppes, The Barclays Group, Xstrata, Shell etc. • Investment by South Africa • Total investments by South Africa into UK were: – R 440 billion in 2005 – R 479 billion in 2006 – R 517 million in 2007 • • South African companies operating in the UK: Anglo Platinum, Aveng Ltd, Dimensions Data, First Rand, Netcare Holdings, Sasol Ltd, Old Mutual, SAB Miller, Standard Bank, Steinhoff Ltd, Sanlam, Sappi Ltd etc UK is one of South Africa’s largest trading partners 4

SA/UK Tax Treaty-Trade Flows • Exports to the UK • Exports to UK were: – – R 32, 3 billion in 2005 R 31, 7 billion in 2006 R 34, 6 billion in 2007 R 40. 1 billion in 2008 • Main exports: minerals, metals, and agricultural products (such as vegetables products, animal products, grapes, wine of fresh grapes including fortified wine, fresh or chilled fish) etc • Imports to UK were: – – R 20 billion in 2005 R 23 billion in 2006 R 27, 2 billion in 2007 R 34, 7 billion in 2008 • Main imports: Turbo –Jest, Turbo-Propellers and gas turbines, electrical motors, and generators; self-propelled bulldozers; angle dozers; graders; levelers; printing etc 5

SA/Ireland Tax Treaty-Investment Flows • Investment by Ireland • Total investments by Ireland into South Africa were: – R 1, 5 billion in 2005 – R 1, 9 billion in 2006 – R 2, 4 billion in 2007 • Irish companies or representative offices operating in South Africa include Independent News and Media; Guinness; Spectra Group; Howard Holdings; ESB International; etc • Investment by South Africa • Total investments by South Africa into Ireland were: – R 33, 4 billion in 2005 – R 45, 4 billion in 2006 – R 51, 4 billion in 2007 • South African companies or representative offices operating in Ireland include AECI Ltd; Alexkor; Anglo Platinum; Coronation; Dimension Data, Datatec; Sasol Ltd, Investec; Old Mutual; SABMiller; Sappi Ltd etc, etc. 6

SA/Ireland Tax Treaty: Trade Flows • Exports to Ireland • Exports from South Africa to Ireland were: – – • R 1, 1 billion in 2005 R 1, 1 billion in 2006 R 1, 3 billion in 2007 R 1, 7 billion in 2008 Main exports: base metals, machinery, mechanical and electrical appliances, base metals, mineral products etc • Imports from Ireland • Imports from Ireland to South Africa were: – – • R 4 billion in 2005 R 4, 3 billion in 2006 R 5, 6 billion in 2007 R 7, 1 billion in 2008 Main imports: works of art, collector’s pieces & antiques, vegetable product, plastics &articles, live animals, animal products, wood charcoal, natural or cultured pearls, raw hides & skins, leather, fur skins, umbrellas, headgear etc 7

SA/Sweden Tax Treaty- Investment Flows Investment by Sweden: • Total investments by Sweden in South Africa were: – R 3, 1 billion in 2005 – R 3, 8 billion in 2006 – R 3, 5 billion in 2007 • Swedish companies or representative offices operating in South Africa include: Atlas Copco, Electrolux, Ericson, Volvo, Scania, Svedala, Tetra Pak, Sandvik etc • Investment by South Africa: • Total investments by South Africa into Sweden were: – R 991 million in 2005 – R 1, 4 billion in 2006 – R 1, 3 billion in 2007 • South African companies or representative offices operating in Sweden include: Dimensions Data; Tiger Wheels; Sappi etc. 8

SA/Sweden Tax Treaty-Trade Flows • Exports to Sweden: • Exports from South Africa to Sweden were: – – • R 1, 5 billion in 2005 R 2, 9 billion in 2006 R 2, 9 billion in 2007 R 3, 4 billion in 2008 Main Exports: Win of Fresh Grapes; Citrus and dried fruit; Safety Fuses; Grapes; Machinery; Aluminum Waste and Scrap; Fish etc • Imports from Sweden: • Imports from Sweden to South Africa were: – – • R 4, 8 billion in 2005 R 5, 8 billion in 2006 R 8, 1 billion in 2007 R 10 billion in 2008 Main Imports: Motor Cars; Fork Lifts Trucks; Paper and paperboard; Plates; Dishwashing Machines; Generators etc 9

SA/Kuwait Tax Treaty- Investment Flows Investment by Kuwait: • Total investments by Kuwait in South Africa were: – R 2 million in 2006 – R 763 million in 2007 – R 1 million in 2008 • Kuwait companies or representative offices in South Africa include: IFA Hotels and Kuwait Group (Zimbali Lodge); Kapico South Africa; Sheraton Holt and towers; Oubaai Golf Estate ; Lombardy Estate; Legend Golf and Safari Resort , Boschedndal Estate etc • Investment by South Africa: • Total investments by South Africa in Kuwait were: – R 1 million in 2006 – R 161 million in 2007 – R 24 million in 2008 • South African companies or representative offices in Kuwait include: Datatec Ltd; Murray and Roberts; Sasol Ltd 10

SA/Kuwait Tax Treaty-Trade Flows • Exports to Kuwait: • Exports from South Africa to Kuwait were: – – R 306 million in 2005 R 193 million in 2006 R 286 million in 2007 R 1, 6 billion in 2008 • Main exports: Chemical products; Transport equipment; Animal products; Base Metals; Pulp, wood, Paper Products; Machines for cleaning etc • Imports from Kuwait: • Imports from Kuwait to South Africa were: – – R 314 million in 2005 R 130 million in 2006 R 8, 8 million in 2007 R 284 million in 2008 • Main imports: Petroleum Oils; Minerals or chemical fertilizers; Plaster, Cement, Artworks; Shawls; Scarves etc 11

SA/Malta Tax Treaty- Investment Flows Investment by Malta: • Total investments by Malta in South Africa were: – R 38 million in 2006 – R 40 million in 2007 – R 1, 3 million in 2008 • Investment by South Africa: • Total investments by Malta in South Africa were: – R 19 million in 2006 – R 6 million in 2007 – R 15 million in 2008 • Major investments by SA companies in Malta include: • Illovo Sugar Ltd; Anglo. Gold Ashanti; Dimension Data etc 12

SA/Malta Tax Treaty- Trade Flows • Exports to Malta: • Exports from South Africa to Malta were: – – R 10, 6 million in 2005 R 56, 7 million in 2006 R 33, 9 million in 2007 R 31, 9 million in 2008 • Main exports: chemical products, machinery and mechanical appliances, base metals, animal products, etc • Imports from Malta to South Africa were: – – R 30, 1 million in 2005 R 37, 6 million in 2006 R 80, 8 million in 2007 R 118 million in 2008 • Main imports: chemical products, plastic products, transport equipment, machinery, paper products, etc 13

SA/Cyprus Tax Treaty- Investment Flows Investment by Cyprus: • No records of investment flows • Investment by South Africa: • No records of investments 14

SA/Cyprus Tax Treaty-Trade Flows • Exports to Cyprus: • Exports from South Africa to Cyprus were: – – R 50 million in 2005 R 106 million in 2006 R 65 million in 2007 R 79 million in 2008 • Main exports: Automatic data Processing machines; Wine; Fruit Juices; Tyres; Wire of Iron or Non-Alloy Steel; petroleum Jelly etc • Imports from Cyprus: • Imports from Cyprus to South Africa were: – – R 17, 8 million in 2005 R 19, 4 million in 2006 R 16, 2 million in 2007 R 19, 8 million in 2008 • Main imports: Fishing Vessels; factory Ships; Salt; Toilet paper; Cigars; Coffee; Spectacles; Trunks; Suitcases etc 15

SA/Oman Tax Treaty- Investment Flows Investment by Oman: • Total investments by Oman in South Africa were: – R 3 million in 2006 – R 2 million in 2006 – R 1 million in 2007 • Investment by South Africa: • Total investments by South Africa in Oman were: – R 1 million in 2006 – R 9 million in 2006 – R 1 million in 2007 • Major investments by SA companies in Oman include: Sasol Ltd; Datatec; Murray and Roberts etc 16

SA/Oman Tax Treaty-Trade Flows • Exports to Oman: • Exports from South Africa to Oman were: – – R 180 million in 2005 R 480 million in 2006 R 327 million in 2007 R 495 million in 2008 • Main exports: Citrus Fruit; House Hold Furniture; Grapes; Apples; Wine of Fresh Grapes; Sugarconfectionary etc • Imports from Oman: • Imports from Oman to South Africa were: – – R 792 million in 2005 R 1, 3 million in 2006 R 2, 9 billion in 2007 R 1, 2 billion in 2008 • Main imports: Perfumes and Toilet Waters; Antibiotics; Chromium Ores and Concentrates; Self –Adhesive Plates; Bread; Pastry etc 17

SA/Seychelles Tax Treaty- Investment Flows Investment by Seychelles: • Total investments by Seychelles in South Africa were: – R 29 million in 2006 – R 31 million in 2007 – R 30 million in 2008 • Investment by South Africa: • Total investments by Seychelles in South Africa were: – R 72 million in 2006 – R 77 million in 2007 – R 134 million in 2008 • Major investments by South Africa companies in Seychelles include: SAA; Bidvest group; Pam Golding; Trans Hex Group; United Resorts and Hotels etc • SADC member State 18

SA/Seychelles Tax Treaty-Trade Flows • Exports to Seychelles: • Exports from South Africa to Seychelles were: – – R 597 million in 2005 R 502 million in 2006 R 407 million in 2007 R 472 million in 2008 • Main exports: Wood; Yachts; Fruit Juices; Machinery; Maize (Corn); Insecticides; Wine; Citrus Fruit; Dried Fruit etc • Imports from Seychelles: • Imports from Seychelles to South Africa were: – – R 17 million in 2005 R 15, 2 million in 2006 R 45 million in 2007 R 3, 7 million in 2008 • Main imports: Flour; Coconuts; Fish; Beer Made from Malt; Umbrellas etc 19

Reasons For SA / Malawi New Tax Treaty • Renegotiation of the old tax treaty; • First tax treaty between South Africa and the Malawi came into force on 2 September 1971 • During that time, South Africa was still on source based system of taxation and did not have capital gains tax system 20

SA/Malawi Tax Treaty- Investment Flows Investment by Malawi: • Total investments by Malawi in South Africa were: – R 122 million in 2006 – R 199 million in 2007 – R 155 million in 2008 • Investment by South Africa: • Total investments by South Africa in Malawi were: – R 161 million in 2006 – R 214 million in 2007 – R 303 million in 2008 • Major investments by South Africa companies in Malawi include: Nedbank; Cashbuild; Alexander Forbes; AD Corp Holdings; Bell Equipment; Massmart; Illovo Sugar Ltd; The Bidvest Group; SAA; Bleu Financial Services Etc 21

SA/Malawi Tax Treaty-Trade Flows • Exports to Malawi: • Exports from South Africa to Malawi were: – – R 1, 5 billion in 2005 R 1, 6 billion in 2006 R 2, 1 billion in 2007 R 3, 8 billion in 2008 • Main exports: Mineral or chemical Fertilizers; Motor Vehicles; Tractors; Petroleum Jelly; Maize; Refrigerators etc • Imports from Malawi: • Imports from Malawi to South Africa were: – – R 455 million in 2005 R 531 million in 2006 R 647 million in 2007 R 971 million in 2008 • Main imports: Cotton; Natural Rubber; Pepper of Genus Pepper; Nuts ; Fruit; Rice; Blankets ; Sunflower Seeds etc 22

THANK YOU 23