Interrelating treaties lower the WHT on Dividends between South Africa and the Netherlands

Tax courts in the Netherlands and South Africa have confirmed that the effective withholding tax (“WHT”) rate on dividends under the Netherlands – South Africa Double Tax Avoidance Agreement (“NL – SA DTAA”) is 0%, should a company hold at least 10% of the shares in the company paying the dividend. This rate remains conditional upon two factors: the exemption from dividend WHT in the South Africa – Kuwait DTAA (“KU – SA DTAA”) remaining in force and the most favoured nation clause in the South Africa – Sweden DTAA (“SW – SA DTAA”) remaining unchanged. The decisions of the Tax Courts, which apply to dividends flowing between South Africa and the Netherlands, has interesting implications for multinational companies looking to invest in the Netherlands or in South Africa.


03 Dec. '19
Patrick T.F. Schrievers

“Most Favoured Nation” (MFN) clauses

MFN clauses are commonly found in DTAAs between developed and developing countries. These clauses are negotiated into DTAAs to ensure that if one of the treaty partners offers a more beneficial treatment to another country, such treatment will also automatically apply under the DTAA that includes the MFN clause. Although MFN clauses are a popular topic of discussion in the context of treaty law as well as EU law, it is difficult to keep up with the actual application of these clauses because of their inter-dependence and also the complexity of language.

Decision of the Dutch Supreme Court

On 18 January 2019, the Dutch Supreme Court ruled in favour of a SouthAfrican company holding more than 10% in a Dutch subsidiary, that claimed a refund of the 5% dividend WHT it had previously paid, based on the MFN clause in the NL – SA DTAA.


Patrick T.F. Schrievers

Patrick T.F. Schrievers is a tax lawyer and member of the Dutch Association of Tax Advisers (NOB) and the International Fiscal Association (IFA).

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