1. Preliminary Double Taxation Conventions / Agreements United Arab Emirates and Mexico SCOF: 24 June 2008

2. South Africa – United Arab Emirates Double Taxation Agreement

3. Introduction  Closely follows the OECD Model Convention, which forms the foundation for the vast majority of Double Taxation Agreements (DTA’s) worldwide  A number of provisions are different from the normal SA approach. These provisions and other articles of interest in the South Africa – UAE Double Tax Agreement are as follows:

4. Article 1: Persons Covered  Paragraph 2 provides thatnothing in the Agreement shall affect the right of either Contracting State, any political subdivision, local authority or local government, to apply its own laws and regulations relating to the taxation of income and profits derived from hydrocarbons situated in that State.

5. Article 4: Resident  Paragraph 1 (b) includes in the term “resident of a Contracting State” for the UAE, any company or other legal entity which is incorporated or created under the laws of the United Arab Emirates by reason of its residence, domicile, place of management or any other criterion of a similar nature and includes the State itself and any political subdivision, local authority, local government or governmental institution.

6. Article 5: Permanent Establishment  The term “permanent establishment” includes a farm or plantation.  Construction  12 months in OECD Model  6 months in UN Model  South Africa – UAE DTA  Building site, a construction, assembly or installation project or any supervisory activity in connection therewith – more than 12 months before a permanent establishment will exist.

7. Article 8: Shipping and Air Transport  Paragraph 3 provides that interest on funds directly connected with the operation of ships or aircraft in international traffic shall be regarded as profits derived from the operation of such ships or aircraft.

8. Article 10: Dividends  Withholding tax of 5% or 15% proposed by OECD Model  In practice, withholding taxes vary widely internationally  Dividend rate in South Africa – UAE DTA:  5% for shareholding of at least 10%  10% on all others

9. Articles 11: Interest  Withholding tax of 10% proposed by OECD Model  In practice, withholding taxes vary widely internationally  South Africa – UAE DTA Paragraph 1 provides that interest arising in a Contracting State and paid to a resident of the other Contracting State shall be taxable only in that other State, provided such resident is the beneficial owner of the interest.

10. Article 12: Royalties  No withholding tax proposed by OECD Model  In practice, withholding taxes vary widely internationally  South Africa – UAE DTA Paragraph 1 provides that royalties arising in a Contracting State and paid to a resident of the other Contracting State shall be taxable only in that other State, provided such resident is the beneficial owner of the royalties.

11. Article 14: Income from Employment  Paragraph 4 provides that remuneration derived by a resident of a Contracting State in respect of an employment exercised in the other Contracting State with an enterprise of the first-mentioned State, operating ships or aircraft in international traffic, shall be exempt from tax in that other State on the remuneration received for a period of four years beginning with the date on which the employee first performs duties in that other State.

12. Article 17: Pensions and Annuities  Paragraph 2 provides that pensions and other similar payments made under the social security system of a Contracting State or a political subdivision or a local authority or a local government shall be taxable only in that State.

13. Article 18: Government Service  Paragraph 1 provides that salaries, wages and other similar remuneration, other than a pension, paid by a Contracting State or a political subdivision or a local authority or a local government to an individual in respect of services rendered to that Contracting State or political subdivision or local authority or local government shall be taxable only in that State. Remuneration paid by a Contracting State to a specialist or volunteer seconded to the other Contracting State under a development assistance agreement is included under this paragraph.

14. Article 19: Professors and Teachers  This Article provides an exemption from tax in the host State for two years in respect of visiting teachers or researchers. However, the remuneration must be derived from outside the host State. This Article does not apply to income from research if the research is undertaken not in the public interest but primarily for the private benefit of a specific person.

15. Article 20: Students and Trainees  Paragraph 2 provides that in respect of grants, scholarships and remunerations from employment not covered under paragraph 1, a student or business trainee shall be entitled to the same exemption, relief or reductions in respect of taxes available to residents of the Contracting State being visited.

16. Article 27: Refunds  This Article covers “refunds” and provides that taxes withheld at source in a Contracting State shall be refunded at the request of the taxpayer or of the State of which the taxpayer is a resident if the right to collect these taxes is affected by the provisions of this Agreement. The competent authorities of the Contracting States shall by mutual agreement settle the mode of application of this Article.

17. South Africa – Mexico Double Taxation Agreement

18. Introduction  Closely follows the OECD Model Convention, which forms the foundation for the vast majority of Double Taxation Agreements (DTA’s) worldwide  A number of articles are different from the normal SA approach. These articles and other articles of interest in the South Africa – Mexico Double Tax Agreement are as follows:

19. Article 4: Resident  Paragraph 3 provides that if a person other than an individual is a resident of both Contracting States, the competent authorities of the Contracting States shall by mutual agreement settle the question and determine the mode of application of the Agreement to such person. In the absence of such agreement such person shall be considered to be outside the scope of the Agreement except for the provisions of Article 25 (Exchange of Information.  Paragraph 4 provides that a partnership or a trust is a resident of a Contracting State only to the extent that the income it derives is subject to tax in that State as the income of a resident, either in the hands of the partnership or trust, or in the hands of its partners, trustees or beneficiaries.

20. Article 5: Permanent Establishment  Construction  12 months in OECD Model  6 months in UN Model  South Africa – Mexico DTA  Building site, a construction, assembly or installation project or any supervisory activity in connection therewith – more than 12 months before a PE will exist.

21. Article 5: Permanent Establishment  Paragraph 6 provides that an insurance enterprise of a Contracting State shall, except in regard to reinsurance, be deemed to have a permanent establishment in the other Contracting State if it collects premiums in the territory of that other State or insures risks situated therein through a person other than an agent of an independent status to whom paragraph 7 applies.

22. Article 7: Business Profits  Paragraph 1 provides that if the enterprise carries on a business, the profits of the enterprise may be taxed in the other State but only so much as is attributable to that permanent establishment and sales in that other State of goods or merchandise of the same or similar kind as the goods or merchandise sold through that permanent establishment. The profits derived from the sales shall not be taxable in the other Contracting State if the enterprise demonstrates that the sales have been carried out for reasons other than obtaining a benefit under this Agreement.

23. Article 9: Associated Enterprises  Paragraph 3 provides that the provisions of paragraph 2 shall not apply in the case of fraud, gross negligence, or wilful default.

24. Article 10: Dividends  Withholding tax of 5% or 15% proposed by OECD Model  In practice, withholding taxes vary widely internationally  Dividend rate in South Africa – Mexico DTA:  5% for shareholding of at least 10%  10% on all others

25. Articles 11: Interest  Withholding tax of 10% proposed by OECD Model  In practice, withholding taxes vary widely internationally  South Africa – Mexico DTA: 10%  Paragraph 8 provides that interest which has been recharacterised as a dividend will be dealt with under Article 10

26. Article 12: Royalties  No withholding tax proposed by OECD Model  In practice, withholding taxes vary widely internationally  South Africa – Mexico DTA: 10%

27. Article 21: Limitation of Benefits  This Article covers “Limitation of Benefits” and provides that a person (other than an individual) which is a resident of a Contracting State shall not be entitled under this Agreement to relief from taxation in the other Contracting State unless certain requirements are meet.  The aim is to ensure that the benefits apply only to genuine residents of the two countries.

28. Article 26: Assistance in the Collection of Taxes  Under this Article the two States are empowered to collect taxes on behalf of each other.

29. PROTOCOL  The protocol contains a number of clarifications and explanations of provisions in the Agreement which are in line with normal treaty interpretation. In particular rules of interpretation have been agreed which ensure that a consistent approach is achieved.