On 30 September 2022, South Africa deposited its instrument of ratification of the Multilateral Instrument (MLI) which will enter into force for South Africa on 1 January 2023.
The MLI will not function in the same way as an amending protocol to a bilateral double tax agreement (DTA) which directly amends the text of the specific DTA. Instead, it will apply alongside existing DTAs as it modifies their application in order to implement the OECD's Base Erosion Profit Shifting (BEPS) measures. Although the MLI will enter into force for South Africa on 1 January 2023, its entry into force for South Africa's covered agreements (tax treaties) will depend on the ratification of the MLI by the counterparty to a particular covered agreement.
The MLI will push forward important amendments to South Africa's double tax agreements involving, inter alia, the implementation of the minimum standards relating to the prevention of treaty abuse, the improvement of dispute resolution and an assessment of dual resident entities.
The entry into force of the MLI on 1 January 2023 poses a myriad of challenges when it comes to international tax and international tax planning in South Africa. Taxpayers will not only have to become familiar with South Africa's position in relation to the MLI but will also have to account for other jurisdiction's positions in deciding whether the MLI is applicable and how it is applicable in each circumstance
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.