On 1 March 2017, the South African Revenue (SARS) issued a private binding ruling no. BPR 267 regarding dividends tax and the ‘most favoured nation’ clause in a tax treaty concluded with Sweden. The ruling determines whether dividends tax must be withheld when a dividend is paid to the beneficial owner that is a resident of the Kingdom of Sweden. Sweden and South Africa concluded the SA/Sweden tax treaty which, when read with the Protocol, includes a ‘most favoured nation’ clause.
The ruling is mainly issued on the basis of an application from a company incorporated in and a resident of South Africa that is a wholly-owned subsidiary of a company incorporated in and a resident of Sweden. According to ruling, applicant will not be required to withhold dividends tax from the dividend payments to parent company if parent company complies with the documentary requirements in section 64G(3). The ruling describes that the MFN treatment under the treaty with Sweden was triggered by the South Africa – Kuwait Income Tax Treaty (2004).
This binding private ruling is valid for a period of three years from 7 December 2016.
