International Tax
Leveraging Double Tax Agreements in Tax Advisory and Planning
Duration: 2 hours
Price: R195.00
Title / Topic
Leveraging Double Tax Agreements in Tax Advisory and Planning
Presenters : Hugo van Zyl , Mathys Briers-Louw
Overview
This video provides a foundational understanding of DTAs and their practical application, particularly for South African taxpayers with global interests.
We use the HMRC vs. Jonathan Oppenheimer case as a study to illustrate how a DTA's "tie-breaker" clause can determine tax residency and help save a taxpayer from significant tax assessments. The session also covers recent updates, including the implementation of the OECD Multilateral Instrument (MLI), which modernizes many existing DTAs.
Video Content
- DTAs are bilateral treaties designed to prevent the same income from being taxed twice. They allocate taxing rights and provide legal certainty for those involved in cross-border activities, such as expats and investors.
- The Jonathan Oppenheimer case serves as a prime example of a DTA's benefit. Oppenheimer, a South African, is considered a UK resident under domestic law but claims "treaty residence" in South Africa using the RSA-UK DTA's "tie-breaker" clause. The UK Tribunal rules that his "centre of vital interests" is in South Africa, saving him over £20 million in taxes. (This example illustrates practical application.)
- The South African Income Tax Act (ITA) explains that an individual who is deemed an exclusive resident of a treaty country is no longer considered a South African tax resident.
- The video highlights the importance of the Multilateral Instrument (MLI), implemented by SARS in January 2023. The MLI updates existing DTAs with new anti-abuse provisions and "principal purpose tests" (PPT) to curb avoidance and align with global standards on Base Erosion and Profit Shifting (BEPS).
- The presentation notes that some countries, including the United States, Botswana, and Brazil, have not signed the MLI with South Africa and therefore do not have MLI-covered agreements in place.
- A key change brought by the MLI is the tie-breaker rule for dual-resident entities, shifting from the "place of effective management" (POEM) test to a mutual agreement between competent authorities.
Competencies Developed
By watching this video, participants are able to:
- Understand cross-border issues facing South Africans, their advisors, and trustees.
- Analyze the pros and cons of DTA benefits from a South African perspective.
- Grasp the thinking and reasoning behind DTAs and the most recent MLI updates.
- Appreciate why both high-net-worth individuals and young South Africans working abroad need to understand DTA rules.
- Understand that DTAs are not to be abused; they do not serve as a "get out of tax jail free" card.