Preliminary Hearings: Tax Treaties with Chile, Kenya, Lesotho, Sri

Lanka, Qatar, Q

Parliamentary PresentationParliamentary Presentation14 October 2009

Presented by Yanga MputaPresented by Yanga MputaTax Policy Unit :National Treasury

General purpose of tax treaties

Policy• Promote economic growth by providing

certainty to cross border investments• Prevent double taxation of the same income• Prevent double taxation of the same income

through:– Certainty of tax treatmenty– Assignment of taxing rights between the two treaty

countriesAdministrationAdministration• Exchange of information• Mutual Agreement Procedure

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• Mutual Agreement Procedure

Reasons for SA/Chile Tax TreatyReasons for SA/Chile Tax Treaty

St th i l ti b t• Strengthen economic relations between South Africa and Chile

• Increase South Africa’s tax treaty network in the Latin American Region

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SA/Chile Tax Treaty-Investment Flows

• Investment by Chile• Total investments by Chile into South Africa were:

– R16 million in 2005R15 million in 2006– R15 million in 2006

– R37 million in 2007

• Investment by South AfricaInvestment by South Africa• Total investments by South Africa into Chile were:

– R205 million in 2005– R286 million in 2006 – R325 million in 2007

• South African companies operating in Chile: Anglo

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South African companies operating in Chile: Anglo American, Dimension Data, SABMiller, Tiger Brands etc

SA/Chile Tax Treaty-Trade FlowsSA/Chile Tax Treaty Trade Flows

• Exports to Chile• Exports to Chile were:

– R341 million in 2005– R403 million in 2006

R426 million in 2007– R426 million in 2007 – R530 million in 2008

• Main exports: fruit Juices, lamps, machines, chemical fertilizers, etc

• Imports to Chile• Imports to Chile were:

– R339 million in 2005R339 million in 2005– R526 million in 2006– R750 million in 2007 – R1 billion in 2008

M i i t h i l f tili i t i ti id

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• Main imports: chemical fertilizers, maize, coconuts, insecticides, etc

Reasons for SA/Kenya Tax TreatyReasons for SA/Kenya Tax Treaty

• Enhance existing economic ties between• Enhance existing economic ties between South Africa and Kenya

• Expand South Africa’s tax treaty network• Expand South Africa s tax treaty network in Africa

• Promote South Africa as a regional centre• Promote South Africa as a regional centre for Africa

• Kenya is the largest and one of the most• Kenya is the largest and one of the most advanced economies in the East Africa Region

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Region

SA/Kenya Tax Treaty-Investment Flows • Investment by Kenya• Total investments by Kenya into South Africa were:

– R1 2 billion in 2005R1,2 billion in 2005– R1,6 billion in 2006– R987 million in 2007

• Investment by South Africa• Total investments by South Africa into Kenya were:

– R120 million in 2005R204 million in 2006– R204 million in 2006

– R969 million in 2007

• South African companies or representative offices operating in p p p gKenya are Afrox, Alexander Forbes, Blue Financial Services, Coca-Cola Sabco, Dimension Data,Italitale Ltd, Liberty Group, Lonrho, Santam, SABMiller, Stanbic, Shoprite, Metro Cash and Carry, Protea Hotels, Nandos, Steers and Engen, etc.

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SA/Kenya Tax Treaty: Trade Flows• Exports to Kenya• Exports from South Africa to Kenya were:

– R2,9 billion in 2005,– R3,2 billion in 2006– R4,6 billion in 2007– 2008

• Main exports: base metals, machinery, mechanical and electrical a e po ts base eta s, ac e y, ec a ca a d e ect caappliances, base metals, mineral products etc

• Imports from KenyaI t f K t S th Af i• Imports from Kenya to South Africa were:

– R203 million in 2005– R171 million in 2006– R205 million in 2007– 2008

• Main imports: works of art, collector’s pieces & antiques, vegetable product, plastics &articles, live animals, animal products, wood, wood charcoal, natural or cultured pearls, raw hides & skins, leather, fur skins, umbrellas headgear etc

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umbrellas, headgear etc

Reasons for SA/Lesotho Tax Treaty

• Renegotiation of the old tax treatyg y• First tax treaty between South Africa and

Lesotho came into force in 1997 • During that time, South Africa was still on

source based system of taxation and did not have capital gains tax system

• Hence, the current tax treaty between South Africa and Lesotho does not cover certain aspects

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• Lesotho is also a member of SADC

SA/Lesotho Tax Treaty- Investment FlowsFlows

Investment by Lesotho:• Total investments by Lesotho in South Africa were:

– R3,1 billion in 2005 – R3, 8 billion in 2006 – R4 billion in 2007

• Investment by South Africa:• Total investments by South Africa into Lesotho were:

– R991 million in 2005– R1, 4 billion in 2006 – R1, 3 billion in 2007

• South African companies or representative offices operating in• South African companies or representative offices operating in Lesotho are Afrox, Aveng Ltd, Blue Financial Services, Cargo Carriers Ltd, Edgars, First Rand, Imperial Group, JD Group, Lewis group, Mr Price, Massmart, Metcash, Nedbank, Santam, Standard Bank Steinhoff Sun International Telkom SABMiller Shoprite

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Bank, Steinhoff, Sun International, Telkom, SABMiller, Shoprite etc.

SA/Lesotho Tax Treaty-Trade Flows

• Exports to Lesotho:Exports from South Africa to Lesotho were:• Exports from South Africa to Lesotho were:

– R5 billion in 2003– R5 billion in 2004– R8 billion in 2005R8 billion in 2005– R7 billion in 2006– R8 billion in 2007

• Imports from Lesotho:• Imports from Lesotho to South Africa were:

– R1,7 billion in 2005 – R83 million in 2006 – R15 million in 2007– R738 million in 2008

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– R738 million in 2008

SA/Lesotho Tax Treaty- Cross Border Movement of Individuals

S th Af i h b d ith• South Africa shares a border with Lesotho, therefore there is regular cross b d t f i di id l b tborder movement of individuals between the two countries

• Exchange of tourists between the two countries

• Students from Lesotho studying in South Africa universities, vice versa

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Reasons for SA/Sri Lanka Tax TreatyReasons for SA/Sri Lanka Tax Treaty

St th i ti b t th t• Strengthen economic ties between the two countries

• South Africa is the most important trading• South Africa is the most important trading partner for Sri Lanka in the Southern African regionregion

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SA/Sri Lanka Tax Treaty- Investment FlowsFlows

Investment by Sri Lanka:• Total investments by Sri Lanka in South Africa were:

– R261 million in 2005– R261 million in 2006– R261 million in 2006– R262 million in 2007

• Investment by South Africa:• Total investments by South Africa in Sri Lanka were:

R12 illi i 2005– R12 million in 2005– R13 million in 2006 – R13 million in 2007

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SA/Sri Lanka Tax Treaty-Trade Flows

• Exports to Sri Lanka:E f S h Af i S i L k• Exports from South Africa to Sri Lanka were: – R185 million in 2005– R155 million in 2006

R183 million in 2007– R183 million in 2007 – R279 million in 2008

• Main exports: containers, grapes, citrus fruit, wine, soya beans etcImports from Sri Lanka:• Imports from Sri Lanka:

• Imports from Sri Lanka to South Africa were: – R77 million in 2005

R103 illi i 2006– R103 million in 2006– R138 million in 2007 – R150 million in 2008

• Main imports: tea natural rubber rami abaca tableware live fish

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• Main imports: tea, natural rubber, rami, abaca, tableware, live fish, toilet paper, etc

Reasons for SA/Qatar Tax Treaty• To advance economic relations between South Africa

and Qatar

• Qatar is strategically of great importance to South Af i it h il f 15 21 billi b l dAfrica as it has oil reserves of 15,21 billion barrels and natural gas reserves exceeding 25 trillion cubic metres

• South African community in Qatar is steadily growing. This is evidenced by the establishment of the South Africa Social Committee (SASCOM) which assist newcomers to Qatar

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SA/Qatar Tax Treaty- Investment FlowsFlows

Investment by Qatar:• Total investments by Qatar in South Africa were:• Total investments by Qatar in South Africa were:

– R46 million in 2005– R3 million in 2006– R49 million in 2007

• Qatar Investment Authority has invested in the PME Infrastructure Management Limited Fund, which in turn invests in infrastructure development in South Africa and Africa as a whole

• Investment by South Africa:• Investment by South Africa:• Major investments by SA companies in Qatar include:

– In 2006, Sasol and Qatar Petroleum entered into a US$ 900 million joint venture gas to liquid facility

– In 2005, Murray and Roberts has been involved in a construction of a stadium in Qatar

• Other South African companies or representative offices operating in Qatar are Clear Channel Independent SA (Pty) Ltd and BASF

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in Qatar are Clear Channel Independent SA (Pty) Ltd and BASF South Africa (Pty) Ltd

SA/Qatar Tax Treaty- Trade Flowsy

• Exports to Qatar:• Exports from South Africa to Qatar were:• Exports from South Africa to Qatar were:

– R79 million in 2005– R149 million in 2006– R263 million in 2007 – R436 million in 2008

• Main exports: chemical products, machinery and mechanical appliances, base metals, animal products, etc

• Imports from Qatar:• Imports from Qatar to South Africa were:

– R913 million in 2005– R1, 2 billion in 2006– R747 million in 2007– R1,4 billion in 2008

• Main imports: chemical products, plastic products,

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transport equipment, machinery, paper products, etc

THANK YOU

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