Tax Treaty between South Africa & Saudi Arabia: Policy Rationale Portfolio Committee on Finance 6 March 2007 Presented by Yanga Mputa Tax Policy Unit :National Treasury National Treasury

Purpose of Tax Treaties Policy Promote economic growth by providing certainty to cross border investments Prevent double taxation of the same income through: Certainty of tax treatment Assignment of taxing rights between the two treaty countries Administration Exchange of information Mutual Agreement Procedure

Reasons for the Saudi Arabian Treaty (Contents) Economic Benefit Promotion of foreign relations in the Gulf Region

Cross Border Investment Flows Investment by Saudi Arabia: In 2004, total investments by Saudi Arabia in South Africa were R3,9 billion In 2005, total investment by Saudi Arabia into South Africa were (-R513 million+R2,408 billion)= R1,9 billion (negative balance results from a liability of R2,408 billion of dividends paid to Saudi Arabia) Types of investments: Real Property, equity capital, etc… Investment by South Africa: Investments by South Africa into Saudi Arabia are insignificant South Africa is net importer of investments

Trade Flows Exports to Saudi Arabia: Imports from Saudi Arabia: Exports to Saudi Arabia were:R1,5 billion in 2004, R1,9 billion in 2005 and R2,1 billion in 2006 Main commodities exported: prepared foodstuffs, vegetable products, base metals, etc… Imports from Saudi Arabia: Imports from Saudi Arabia were:R17,1 billion in 2004, R19,4 billion in 2005 and R24,5 billion in 2006 Main commodities imported :oil, chemical products, etc…

Cross Border Movement of Individuals South African nurses, doctors, engineers working in Saudi Arabia Exchange of tourists between the two countries Students from Saudi Arabia studying in South Africa universities

Other Issues The treaty will promote foreign relations with Saudi Arabia in line with the policy of the Department of Foreign Affairs South Africa is engaged with the negotiations of other bilateral agreements with Saudi Arabia (e.g. an Investment Protection Treaty)

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