Kuwait – South African Protocol affects the lower WHT on Dividends between South Africa and the Netherlands

The following questions have been raised after the recent signing of the KU – SA Protocol, due to the interplay of the Protocol with the Most Favoured Nation (“MFN”) clause in the NL – SA DTAA: What are the effects of the KU – SA Protocol on dividend distributions made between Netherlands subsidiaries and South Africa parent companies? And what does this mean for companies qualifying for a dividend WHT exemption under the NL – SA DTAA? Are South African subsidiaries of Netherlands parent companies (still) entitled to a full elimination of dividend WHT under the NL – SA DTAA? What are the current and future anti-avoidance considerations for claiming 0% WHT on dividends? Can South African or Netherlands companies claim a refund of any dividend WHT paid to Netherlands/South African parent companies and/or what is the statutory time limit? This blog will outline the recent developments surrounding the dividend WHT exemption and address these key questions in relation thereto.

17 Jun. '21 Patrick T.F. Schrievers


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, it is difficult to keep up with the actual application of these clauses because of their inter-dependence and also the complexity of language. With regard to the effective withholding tax (“WHT”) rate on dividends under the Netherlands – South Africa Double Tax Avoidance Agreement (“NL – SA DTAA”), two key court decisions paved the way for a 0% WHT rate (subject to some conditions), by way of applying multiple MFN clauses. These two court decisions are briefly discussed below.

Decision of the Dutch Supreme Court On 18 January 2019, the Dutch Supreme Court ruled in favour of a South African company holding more than 10% in a Dutch

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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