Double Tax Agreement Between South Africa and Ghana: What You Need to Know
Double taxation is a crucial issue for businesses operating in different countries, and it can significantly impact their profits. To avoid this, countries enter into double tax agreements (DTAs) to ensure that businesses are not taxed twice on the same income. South Africa and Ghana are two such countries that have recently signed a DTA.
The DTA between South Africa and Ghana was signed on 25 February 2021 and will become effective on 1 January 2022. The agreement covers various areas, including income tax, capital gains tax, and dividends tax. It aims to promote economic cooperation and investment between the two countries and prevent tax evasion.
Here`s what you need to know about the DTA between South Africa and Ghana.
Scope of the DTA
The DTA covers all types of income, including income from employment, business profits, and pensions. It also covers capital gains tax and dividends tax.
The agreement specifies that profits from the sale of ships, aircraft, and other movable property operated in international traffic will only be taxable in the country of residence of the owner of the property.
Tax Rates
The DTA sets out the maximum rates at which each country can tax the income of residents of the other country. For example, under the DTA, South Africa can tax Ghanaian residents on their income from South Africa at a maximum rate of 15%, while Ghana can tax South African residents on their income from Ghana at a maximum rate of 8%.
The agreement also provides for reduced withholding tax rates for dividends, interest, and royalties. For example, the withholding tax rate for dividends is reduced from 15% to 5% under the DTA.
Taxation of Business Profits
The DTA ensures that businesses operating in both countries are not taxed twice on their profits. It provides for a credit mechanism that allows businesses to claim a credit for the tax paid in the other country on the same income.
The agreement also includes provisions to prevent tax evasion and abuse of the DTA. For example, the agreement includes a provision that allows the tax authorities of one country to request information from the other country to determine whether there has been tax evasion or avoidance.
Conclusion
The DTA between South Africa and Ghana is a significant step towards promoting economic cooperation and investment between the two countries. It provides clarity on the tax treatment of cross-border income and ensures that businesses are not taxed twice on the same income.
If you are a business operating in both South Africa and Ghana, it`s essential to understand the DTA`s provisions to ensure that you are not overtaxed. Consult a tax specialist to understand how the DTA can benefit your business and ensure compliance with the tax laws of both countries.
