Impact of South Africa-Kuwait DTA Changes on Dutch and Swedish Shareholders

Recent adjustments to the double tax agreement (DTA) between South Africa and Kuwait have far-reaching implications that could directly affect the tax liabilities of Dutch and Swedish shareholders of South African companies. Specifically, the updated protocol of the South Africa-Kuwait DTA adjusts the dividend withholding tax rate to 5% if the beneficial owner is a company holding at least 10% of the capital of the company paying the dividends, and 10% in other cases, removing the 0% rate previously enjoyed by Kuwaiti shareholders. Due to the “most favoured nation” clauses in the DTAs between South Africa, and The Netherlands and Sweden, Dutch and Swedish shareholders were also able to benefit from the 0% rate provided in the South Africa-Kuwait DTA. However, as a consequence of the above-mentioned changes, Dutch and Swedish shareholders will now also face the increased dividend withholding tax rates on dividends paid by South African subsidiary companies. This change may necessitate a reassessment of existing (investment) structures. For completeness, we emphasize that dividends paid by Dutch subsidiaries to South African shareholders may, under certain circumstances, qualify for the Dutch domestic dividend withholding tax exemption and therefore remain subject to a 0% rate.

Furthermore, the protocol in the South Africa-Kuwait DTA has retroactive application from 1 April 2012, raising potential concerns about historical tax liabilities for dividends paid since then. However, the precise tax consequences of this retroactive application remain uncertain.

If you believe these changes may affect your business or investments, we encourage you to read the detailed report from Renmere – our South African WTS partner – for further insights.

Questions?

Please feel free to reach out to Ivo Kuipers or Luuk Ursem.