South Africa: New exemption certification requirements for equities

Further to our Announcement A12063, dated 23 March 2012, we hereby pass on additional information received from our depository that impacts non-resident beneficial owners who consider themselves as eligible for exemption of withholding tax on all equities issued by South African corporations (referred to in A12063 and herein as “South African Equities”).

Background

Exemption of tax on South African Equities (that is, issued by South African corporations, and excluding Inward Listed Securities) can be requested by eligible South African residents, by foreign entities exempted from worldwide tax by way of the Diplomatic Immunities and Privileges Act schedule 3 and 4 on the United Nations and its specialised agencies, and by supranational entities.

For such foreign and supranational entities, the requirement was, when submitting an exemption request, that supportive documentation be provided in addition to the Form DTD(EX). Our depository would then request the South African Revenue Service (SARS) to validate the exempt status of the beneficial shareholder.

New requirements

The South African Revenue Service (SARS) has now advised that the exemption status should be validated, either by them or by an external tax advisor, before the submission of the exemption request for an actual dividend payment.

SARS offers a service whereby beneficial shareholders can obtain a tax exemption response directly from SARS via two options, as follows:

Option 1:

The beneficial shareholder applies to SARS directly by completing a form and supplying the necessary documentation for onward submission to the Tax Exempt Unit of SARS. It is our depository’s understanding that this application process is a non-binding private opinion that entails no cost implications and the opinion on the applicant’s tax exemption status is not binding on SARS. The final form with the relevant documentation needs to be submitted to the following SARS Unit:

The Head: Tax Exemption Unit
Box 11955
Hatfield
0028
South Africa

Option 2:

The beneficial shareholder can obtain an Advance Tax Ruling (ATR) from SARS that will be binding on SARS. However, this service entails cost implications that depend on the nature and complexity of the query. All details related to this service and process can be found on the SARS website.

Impact on customers

Customers who submit a request for exemption to us (that is, at source, via quick reclaim or standard reclaim) on behalf of a beneficial shareholder with regard to dividends from South African Equities must ensure that the supportive documentation provided has been validated either by SARS or by an external tax advisor.

Note: These requirements are not applicable to such exemption requests with regard to equities issued by foreign corporations and secondarily listed on the JSE (referred to in A12063 and herein as “Inward Listed Equities”).

Further information

For further information, please contact the Clearstream Banking¹ Tax Help Desk on:

or Clearstream Banking Customer Service or your Relationship Officer.

1. Clearstream Banking refers collectively to Clearstream Banking AG, registered office at 61, Mergenthalerallee, 65760 Eschborn, Germany and registered in the Register B of the Amtsgericht Frankfurt am Main, Germany under number HRB 7500 (CBF) and Clearstream Banking, société anonyme, registered office at 42, avenue John F. Kennedy, L-1855 Luxembourg, and registered with the Luxembourg Register of Commerce and Companies under number B-9248 (CBL).