BACKGROUND – POSITION BEFORE THE KU – SA PROTOCOL
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
