Abstract
This article investigates the legal status of Double Taxation Agreements, and the relationship between Double Taxation Agreements, which are concluded in terms of section 108 of the Income Tax Act, and the provisions of the Income Tax Act (taking into account the provisions of the Constitution, and the national and international rules for the interpretation of statutes). An important conclusion reached was that as the Vienna Convention on the Law of Treaties represents customary international law and as such forms part of South African law, the principles contained in the treaty should be taken into account when interpreting South African legislation (including Double Taxation Agreements). The final conclusion of the research was that Double Taxation Agreements have a dual nature – forming part of domestic legislation and being classified as international agreements. The provisions of the Double Taxation Agreement should be taken as overriding any conflicting legislation in the Income Tax Act.
Highlights
As the calculation of a person’s liability for income tax in South Africa begins with gross income, it is essential to determine whether or not an amount should be included in the person’s gross income
This article has discussed the legal status of tax treaties in relation to the provisions of the Income Tax Act, taking into account the Constitution and the national and international rules for the interpretation of statutes
The following conclusions have been reached: a) As tax treaties have a dual nature – forming part of domestic legislation and being classified as international agreements – the tax treaties will have the same legal effect as any other section in the Income Tax Act, and should be interpreted in accordance with the South African rules regarding the interpretation of statutes
Summary
As the calculation of a person’s liability for income tax in South Africa begins with gross income, it is essential to determine whether or not an amount should be included in the person’s gross income. An amount received by or accrued to a non-resident may be subject to tax in South Africa in terms of the South African source rules, while being subject to tax in the country of residence of the taxpayer. The converse situation may arise, that is, an amount may be received by or accrued to a South African resident taxpayer from a source outside South Africa, which is subject to tax in the other country in terms of that country’s tax legislation, while being subject to tax in South Africa as a result of the taxpayer’s residence in South Africa. DTAs, do not create taxing rights, but merely allocate taxing rights to the country in question
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