The Pros And Cons Of The South African Treaty

713 Words 3 Pages
The South African treaty does not tax entertainers or sportsmen on income earned up to $7,500 unlike the US Treaty which does not tax them on income earned up to $20,000. However, this does not exempt them from withholding as it is not always certain that the earnings will be limited to the exempt threshold. The South African treaty also references the exemption of tax on income received from the government of the home state for performances in the other state. The United States limits the distributions of pensions to 15 percent of the gross distributions, unless the distribution is penalized for early distribution and taxed at normal rates. Pension distributions where South Africa is the source state is multiplied by a fraction that is determined …show more content…
Residents are allowed to use these taxes as a credit against their South Africa taxes. However, the credit is limited to the percentage of tax due prior to the application of the credit, similar to the application of foreign tax credits in the United States. Mutual agreement procedures in South Africa define the time limits for refund claims, unlike the US Model, as “within three years from the first notification of the action resulting in taxation not in accordance with the provisions of this convention (or in the case of tax collected at source within three year from the date of collection)” ( ). On the other hand, the US model declares that any procedural collections or assessments will be suspended during the pending proceedings. Unlike the South Africa Treaty, the US model claims the authority to agree to the timing of particular income items, advance pricing arrangements, as well as “the provisions of domestic law regarding penalties, fines and interest” ( ) consisted with the convention. They also claim authority to agree on any increases on dollar amounts regarding economic or monetary developments in the convention, as well as direct communication with each other or via a joint commission regarding these …show more content…
The United States will enter into force as of the date of the exchange of information and taxes will begin to be withheld as of the 1st day of the second month of the convention entering into force and other taxes as of the following January of the convention going into force just like the South Africa procedures. However, South Africa’s convention will not go into force until 30 days after notification of compliance of requirements have been provided and withholding will begin as of the first day of January after the convention coming into force. Also, unlike the South Africa Treaty, the US Treaty states that the exchange of information shall become effective as of the date of entry into force regardless of the matters taxable

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