Some Thoughts On The Interpretation Of Tax Treaties In South Africa
South Africa is a party to approximately 70 bilateral treaties for the prevention of double taxation on different types of income. Most of South Africa’s treaties are based in some way on the Model Tax Convention drafted by the Organisation for Economic Co-operation and Development (OECDMTC). The OECD MTC is by far the most influential of the model tax conventions and is used widely, not only by OECD members, but also by non-OECD members (such as South Africa). It is important to note, though,that the OECD MTC is not an international treaty that is binding on its members. As a model tax convention, it is used by countries as a basis from which to negotiate tax treaties. Thus, although an actual treaty between two countries (eg, South Africa and another country) may not be worded exactly like the OECD MTC, many of the terms used in the actual treaty may adopt the wording of the model or contain its wording with some adjustments. The OECD MTC is updated every two to three years, and is accompanied by commentary drafted by the OECD.
In a number of fairly recent decisions, the South African courts have been called upon to apply some of the tax treaties entered into by South Africa with a view to establishing a taxpayer’s liability to tax in South Africa. The purpose of this article is to examine some of these decisions and to glean some thoughts on the approach taken by South African courts to the interpretation of tax treaties entered into by South Africa. In order to achieve this, the status of tax treaties in South Africa will be discussed and recent decisions regarding such status will be considered. Some general comments regarding the interpretation of tax treaties will follow and provide the required background for a discussion of the South African decisions on the interpretation of treaties.
Source: By I Du Plessis (University of the Stellenbosch)SA Merc LJ
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