The most controversial result of the case is that the court found that after May 2008, when the taxpayer was no longer in South Africa, there was still a “permanent facility” in South Africa, giving the right to tax the taxpayer in South Africa on the success costs that were earned after leaving South Africa. The Tribunal justified this decision by the fact that the 183-day requirement was still met, since the DBA text refers to “every 12-month period” allowing double counting in accordance with the provisions of the DBA. The aim of the DBA is to prevent the possibility of tax evasion and the OECD`s commentary recognises the possibility of double counting. Is there a double taxation convention between South Africa and the United States? If you are a South African employed in the United States of America, there has been a double taxation agreement between the two countries since 1997. In 2010, the United States passed the Foreign Account Tax Compliance Act (FATCA) to combat offshore tax evasion by encouraging transparency and obtaining information on the accounts of U.S. citizens in other countries. FATCA asks foreign financial institutions to provide annual information about U.S. account holders to the U.S. Internal Revenue Service (IRS). Otherwise, the foreign financial institution will be subject to a 30 per cent withholding tax on certain payments at U.S. source, such as interest.
However, the source levy will be adopted when foreign financial institutions enter into disclosure agreements with the U.S. Treasury. A double taxation convention (DBA) is a legal concept between two countries that specifies where the tax obligation of individuals lies. A double taxation convention is intended to prevent a subject from being subject to disproportionate taxation, both in South Africa and in the country mentioned in a specific agreement. A DBA provides a legislative defence of double taxation and sets out many of the requirements that a person must meet to determine where he or she resides as a tax resident. If the person is considered a tax resident, he or she is required to pay certain types of taxes collected taking into account the relevant DBA, as well as updated legislation on the exemption from expat income tax. On May 15, 2015, the Tax Court issued a ruling on the interpretation of the Double Taxation Convention between South Africa and the United States of America (DBA). In short, the facts were that two companies came to South Africa in 2007 to provide strategic and financial advice for a client based in South Africa. The contract to provide services was concluded on the basis that South Africans who live and earn in Australia are covered by this double taxation agreement.