The Australian Tax Office (ATO) has asked SARS for information on a person suspected of evading his Australian tax obligations. The application was made within the meaning of the applicable double taxation agreement. The information was known to a South African resident: Werner van Kets. In the search for van Kets, SARS relied on provisions of the Income Tax Act that required the provision of information to SARS. 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. The DBAs do not levy taxes, but overwhelm the national income tax provisions in order to obtain a tax result in accordance with the agreements.
The above navigation area can be used to access the texts of the corresponding agreements. For example, Australian taxpayers are generally taxed on global income, that is, Australian and foreign income. It is therefore clear that the income of foreign companies is taxable in Australia. But an Australian taxpayer with South African business income must read the South African DBA to determine how the company`s income is taxed. The South African DBA agreement stipulates that when Australian tax residents operate in South Africa, these business incomes are taxed only in South Africa. This means that the income of South African companies in Australia is not taxable. A strict interpretation of the provisions in this area seemed to favour van Kets` assertions. HOWEVER, SARS argued for a broader interpretation.
As far as South African legislation is concerned, a double taxation convention approved by Parliament has the strength of South African legislation. SARS therefore submitted that the relevant provisions of the Income Tax Act were to be read under the provisions of the double taxation convention. In the event of strict interpretation, SARS would have virtually no way of obtaining the information requested by the ATO. The agreements between the two tax administrations in two countries are intended to allow administrations to eliminate double taxation. Double taxation conventions (DBAs) are agreements between Australia and nearly forty-four other countries, which aim to prevent double taxation, tax evasion and help tax authorities in each country enforce their respective tax laws. 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. The High Court followed SARS`s arguments. He noted that the provisions of the Double Taxation Convention and the Income Tax Act should, if possible, be reconciled and understood as a coherent whole.
