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文档位置:主页 > 国际税收协定库 > 美国 > 正文
  • 发文单位:中华财税网
  • 文    号:
  • 颁布日期:1997-02-17
  • 失效日期:
DEPARTMENT OF THE TREASURY TECHNICAL EXPLANATION OF THE CONVENTION BETWEEN THE UNITED STATES OF AMERICA AND THE REPUBLIC OF SOUTH AFRICA (5)
  
DEPARTMENT OF THE TREASURY TECHNICAL EXPLANATION OF THE CONVENTION BETWEEN
THE UNITED STATES OF AMERICA AND THE REPUBLIC OF SOUTH AFRICA FOR THE
AVOIDANCE OF DOUBLE TAXATION AND THE PREVENTION OF FISCAL EVASION WITH
RESPECT TO TAXES ON INCOME AND CAPITAL GAINS (5)

         ARTICLE 10
               Dividends
  Article 10 provides rules for the taxation of dividends paid by a
resident of one Contracting State to a beneficial owner that is a
resident of the other Contracting State. The Article provides for full
residence country taxation of such dividends and a limited source-State
right to tax. Article 10 also provides rules for the imposition of a tax
on branch profits by the State of source.
Paragraph 1
  The right of a shareholder's country of residence to tax dividends
arising in the other country is preserved by paragraph 1, which permits a
Contracting State to tax its residents on dividends paid to them by a
resident of the other Contracting State. For dividends from any other
source paid to a resident, Article 21 (Other Income) grants the residence
country exclusive taxing jurisdiction (other than for dividends
attributable to a permanent establishment or fixed base in the other
State).
Paragraph 2
  The State of source may also tax dividends beneficially owned by a
resident of the other State, subject to the limitations in paragraph 2.
Generally, the source State's tax is limited to 15 percent of the gross
amount of the dividend paid. If, however, the beneficial owner of the
dividends is a company resident in the other State that holds at least 10
percent of the voting stock of the company paying the dividend, then the
source State's tax is limited to 5 percent of the gross amount of the
dividend. Indirect ownership of voting shares (through tiers of
corporations) and direct ownership of non-voting shares are not taken
into account for purposes of determining eligibility for the 5 percent
direct dividend rate. Shares are considered voting shares if they provide
the power to elect, appoint or replace any person vested with the powers
ordinarily exercised by the board of directors of a U.S. corporation.
  The benefits of paragraph 2 may be granted at the time of payment by
means of reduced withholding at source. It also is consistent with the
paragraph for tax to be withheld at the time of payment at full statutory
rates, and the treaty benefit to be granted by means of a subsequent
refund.
  Paragraph 2 does not affect the taxation of the profits out of which
the dividends are paid. The taxation by a Contracting State of the income
of its resident companies is governed by the internal law of the
Contracting State, subject to the provisions of paragraph 3 of Article 24
(Nondiscrimination).
  The "beneficial owner" of a dividend is understood generally to refer
to any person resident in a Contracting State to whom that State
attributes the dividend for purposes of its tax. Paragraph 1(d) of
Article 4 (Residence) makes this point explicitly with regard to income
derived by fiscally transparent persons. Further, in accordance with
paragraph 12 of the OECD Commentaries to Article 10, the source State may
disregard as beneficial owner certain persons that nominally may receive
a dividend but in substance do not control it. See also, paragraph 24
of the OECD Commentaries to Article 1 (General Scope).
  Companies holding shares through fiscally transparent entities such
as partnerships are considered for purposes of this paragraph to hold
their proportionate interest in the shares held by the intermediate
entity. As a result, companies holding shares through such entities may
be able to claim the benefits of subparagraph (a) under certain
circumstances. The lower rate applies when the company's proportionate
share of the shares held by the intermediate entity meets the 10 percent
voting stock threshold. Whether this ownership threshold is satisfied may
be difficult to determine and often will require an analysis of the
agreements involved.
  Paragraph 2 also provides rules that modify the maximum rates of tax
at source provided in subparagraphs (a) and (b) in particular cases.
These rules deny the lower direct investment withholding rate of
paragraph 2(a) for dividends paid by a U.S. Regulated Investment Company
(RIC) or a U.S. Real Estate Investment Trust (REIT). They also deny the
benefits of subparagraph (b) to dividends paid by REITs in certain
circumstances, allowing them to be taxed at the U.S. statutory rate (30
percent). The United States limits the source tax on dividends paid
by a REIT to the 15 percent rate when the beneficial owner of the
dividend is an individual resident of South Africa that owns a less than
10 percent interest in the REIT.
  The denial of the 5 percent withholding rate at source to all RIC and
REIT shareholders, and the denial of the 15 percent rate to all but small
individual shareholders of REITs is intended to prevent the use of these
entities to gain unjustifiable source taxation benefits for certain
shareholders resident in the other Contracting State. For
example, a corporation resident in South Africa that wishes to hold a
diversified portfolio of U.S. corporate shares may hold the portfolio
directly and pay a U.S. withholding tax of 15 percent on all of the
dividends that it receives. Alternatively, it may acquire a diversified
portfolio by purchasing shares in a RIC. Since the RIC may be a pure
conduit, there may be no U.S. tax costs to interposing the RIC in the
chain of ownership. Absent the special rule in paragraph 2, use of the
RIC could transform portfolio dividends, taxable in the United States
under the Convention at 15 percent, into direct investment dividends
taxable only at 5 percent.
  Similarly, a resident of South Africa directly holding U.S. real
property would pay U.S. tax either at a 30 percent rate on the gross
income or at graduated rates on the net income. As in the preceding
example, by placing the real property in a REIT, the investor could
transform real estate income into dividend income, taxable at the rates
provided in Article 10, significantly reducing the U.S. tax burden that
otherwise would be imposed. To prevent this circumvention of U.S. rules
applicable to real property, most REIT shareholders are subject to 30
percent tax at source. However, since a relatively small individual
investor might be subject to a U.S. tax of 15 percent of the net income
even if he earned the real estate income directly, individuals who hold
less than a 10 percent interest in the REIT remain taxable at source at a
15 percent rate.
  The withholding limitations in paragraph 2 apply, at the time of
signature of the Convention, only with respect to United States taxation,
since South Africa does not impose a withholding tax on dividends. If,
however, at some time in the future South Africa introduces a withholding
tax on dividends paid to foreign shareholders, the restrictions in
paragraph 2 will apply to that tax.
Paragraph 3
  Paragraph 3 defines the term "dividends" broadly and flexibly. The
definition is intended to cover all arrangements that yield a return on
an equity investment in a corporation as determined under the tax law of
the State of source, as well as arrangements that might be developed in
the future.
  The term dividends includes income from shares, or other rights that
are not treated as debt under the law of the source State, that
participate in the profits of the company. The term also includes income
that is subjected to the same tax treatment as income from shares by the
law of the State of source. Thus, a constructive dividend that results
from a non-arm's length transaction between a corporation and a related
party is a dividend. In the case of the United States the term dividend
includes amounts treated as a dividend under U.S. law upon the sale or
redemption of shares or upon a transfer of shares in a reorganization.
See e.g., Rev. Rul. 92-85, 1992-2 C.B. 69 (sale of foreign subsidiary's
stock to U.S. sister company is a deemed dividend from the U.S. sister
company to extent of subsidiary's and sister's earnings and profits).
Further, a distribution from a U.S. publicly traded limited partnership,
which is taxed as a corporation under U.S. law, is a dividend for
purposes of Article 10. However, a distribution by a limited liability
company is not characterized by the United States as a dividend and,
therefore, is not a dividend for purposes of Article 10, provided the
limited liability company is not characterized as an association taxable
as a corporation under U.S. law. Finally, a payment denominated as interest
that is made by a thinly capitalized corporation may be
treated as a dividend to the extent that the debt is recharacterized as
equity under the laws of the source State.
Paragraph 4
  Paragraph 4 excludes from the general source country limitations
under paragraph 2 dividends paid with respect to holdings that form part
of the business property of a permanent establishment or a fixed base.
Such dividends will be taxed on a net basis using the rates and rules of
taxation generally applicable to residents of the State in which the
permanent establishment or fixed base is located, as modified by the
Convention. An example of dividends paid with respect to the business
property of a permanent establishment would be dividends derived by a
dealer in stock or securities from stock or securities that the dealer
held for sale to customers.
Paragraph 5
  A State's right to tax dividends paid by a company that is a resident
of the other State is restricted by paragraph 5 to cases in which the
dividends are paid to a resident of that State or are attributable to a
permanent establishment or fixed base in that State. Thus, a State may
not impose a "secondary" withholding tax on dividends paid by a
nonresident company out of earnings and profits from that State. In the
case of the United States, paragraph 5, therefore, overrides the taxes
imposed by sections 871 and 882(a) on dividends paid by foreign
corporations that have a U.S. source under section 861(a)(2)(B).
  The paragraph does not restrict a State's right to tax its resident
shareholders on undistributed earnings of a corporation resident in the
other State. Thus, the U.S. authority to impose the foreign personal
holding company tax, its taxes on subpart F income and on an increase in
earnings invested in U.S. property, and its tax on income of a Passive
Foreign Investment Company that is a Qualified Electing Fund is in no way
restricted by this provision.
Paragraph 6
  Paragraph 6 permits a State to impose a branch profits tax on a
company resident in the other State. The tax is in addition to other
taxes permitted by the Convention. The term "company" is defined in
subparagraph (d) of paragraph 1 of Article 3 (General Definitions).
  A State may impose a branch profits tax on a company resident in the
other State if the company has income attributable to a permanent
establishment in that State, derives income from real property in that
State that is taxed on a net basis under Article 6, or realizes gains
taxable in that State under paragraph 1 of Article 13. The tax is
limited, however, in the case of the United States to the aforementioned
items of income that are included in the "dividend equivalent amount."
That term is defined in paragraph 7.
  Paragraph 6 permits the United States generally to impose its branch
profits tax on the dividend equivalent amount of a corporation resident
in South Africa, in addition to the tax on the profits of the
corporation, at a rate not to exceed 5 percent of the amount of the
corporation's profits that represents the dividend equivalent amount of
the corporation.
  The South African tax that may be imposed under the provisions of
paragraph 6 may be imposed on the profits of a U.S. corporation at a rate
that does not exceed the normal rate of corporate tax by more than 5
percentage points. That tax is imposed in lieu of, and not in addition
to, the normal corporate tax and the secondary tax on companies.
Paragraph 7
  The term "dividend equivalent amount" as used in paragraph 6 is
defined in paragraph 7. The term has the same meaning that it has under
section 884 of the Code, as amended from time to time, provided the
amendments are consistent with the purpose of the branch profits tax.
Generally, the dividend equivalent amount for a particular year is the
income described above that is included in the corporation's effectively
connected earnings and profits for that year, after payment of the
corporate tax under Articles 6, 7 or 13, reduced for any increase in the
branch's U.S. net equity during the year and increased for any reduction
in its U.S. net equity during the year. U.S. net equity is U.S. assets
less U.S. liabilities. See Treas. Reg. section 1.884-1. The dividend
equivalent amount for any year approximates the dividend that a U.S.
branch office would have paid during the year if the branch had been
operated as a separate U.S. subsidiary company.
Paragraph 8
  Paragraph 8 provides for exemption from tax in the State of source
for dividends beneficially owned by certain governmental entities
resident in the other State. The exemption provided in paragraph 8 is
analogous to that provided to foreign governments under section 892 of
the Code. Paragraph 8 makes that exemption reciprocal. The governmental
entities that qualify for this exemption include the Contracting States
themselves and political subdivisions and local authorities of those
States. It also includes a pension plan of the Government described
in the preceding sentence that is operated exclusively to provide pension
benefits described in paragraph 2 of Article 19 (Government Service).

Relation to Other Articles
  Notwithstanding the foregoing limitations on source country taxation
of dividends, the saving clause of paragraph 3 of Article 1 permits the
United States to tax dividends received by its residents and citizens,
subject to the special foreign tax credit rules of paragraph 2 of Article
23 (Elimination of Double Taxation), as if the Convention had not come
into effect.
  The benefits of this Article are also subject to the provisions of
Article 22 (Limitation on Benefits). Thus, if a resident of South Africa
is the beneficial owner of dividends paid by a U.S. corporation, the
shareholder must qualify for treaty benefits under at least one of the
tests of Article 22 in order to receive the benefits of this Article.

            ARTICLE 11
            Interest
  Article 11 specifies the taxing jurisdictions over interest income of
the States of source and residence and defines the terms necessary to
apply the Article.
Paragraph 1
  This paragraph grants to the State of residence the exclusive right,
subject to exceptions provided in paragraphs 3 and 5, to tax interest
beneficially owned by its residents and arising in the other Contracting
State. The "beneficial owner" of a payment of interest is understood
generally to refer to any person resident in a Contracting State to whom
that State attributes the payment for purposes of its tax. Paragraph 1(d)
of Article 4 (Residence) makes this point explicitly with regard to
income derived by fiscally transparent persons. Further, in accordance
with paragraph 8 of the OECD Commentaries to Article 11, the source State
may disregard as beneficial owner certain persons that nominally may
receive an interest payment but in substance do not control it. See also,
paragraph 24 of the OECD Commentaries to Article 1 (General Scope).
Paragraph 2
  The term "interest" as used in Article 11 is defined in Paragraph 2
to include, inter alia, income from debt claims of every kind, whether or
not secured by a mortgage. Penalty charges for late payment are excluded
from the definition of interest. Interest that is paid or accrued subject
to a contingency is within the ambit of Article 11. This includes income
from a debt obligation carrying the right to participate in profits. The
term does not, however, include amounts, that are treated as dividends
under Article 10 (Dividends).
  The term interest also includes amounts subject to the same tax
treatment as income from money lent under the law of the State in which
the income arises. Thus, for purposes of the Convention, amounts that the
United States will treat as interest include the difference between the
issue price and the stated redemption price at maturity of a debt
instrument, i.e., original issue discount (OID), which may be wholly or
partially realized on the disposition of a debt instrument (section
1273), (ii) amounts that are imputed interest on a deferred sales
contract (section 483), (iii) amounts treated as OID under the stripped
bond rules (section 1286), (iv) amounts treated as interest or original
issue discount under the below-market interest rate rules (section 7872),
(v) a partner's distributive share of a partnership's interest income
(section 702), (vi) the interest portion of periodic payments made under
a "finance lease" or similar contractual arrangement that in substance is
a borrowing by the nominal lessee to finance the acquisition of property,
(vii) amounts included in the income of a holder of a residual interest
in a REMIC (section 860E), because these amounts generally are subject to
the same taxation treatment as interest under U.S. tax law, and (viii)
embedded interest with respect to notional principal contracts.

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