South Africa and Mauritius have signed a memorandum of understanding (MOU) on 22 May 2015. Following the signature of the MOU the revised Double Taxation Agreement between the two countries is expected to become effective from 1 January 2016. To bring the treaty into effect Mauritius will have to complete certain relevant domestic procedures and the countries will need to exchange a diplomatic instrument of ratification.
According to the revised treaty if a person other than an individual meets the residency criterion of both the countries the competent authorities of these countries shall by mutual agreement decide the mode of application of the treaty to that person. In the absence of an agreement the person would fall outside the scope of the treaty.
Also, the MOU specifies that the competent authorities would have to consider the place of effective management, the place of incorporation, and any other relevant factors.
According to the revised treaty for taxpayers meeting the participation threshold of 10% the tax rate on dividends would remain the same (5%). But in the case of taxpayers not meeting the 10% threshold the rate will be reduced to 10% from 15%. The withholding tax on interest will be 10% subject to certain exceptions and royalties will be taxed at a rate of 5%.
