(PART OF THE ASIACITI GROUP)

The Double Taxation Treaty (the " treaty") between the Republic of South Africa and the Republic of Mauritius has now been ratified and is in force since 20 June 1997. The treaty was signed by the two countries on 5 July 1996.

Under the treaty, a Mauritius tax resident company is treated as having a permanent establishment ("PE") if a building site or a construction, installation or assembly project or supervisory activities, in connection herewith, continue for a period of more than 9 months.

Specifically, the treaty provides for a reduction in withholding tax on dividend in South Africa to 5 per cent where a Mauritius Offshore Company holds at least 10 per cent of the South African company. Most importantly, under the relevant clause of the treaty, royalties received by a Mauritius Offshore Company from a South African Company will be taxed in Mauritius only. And, in Mauritius, there is no withholding tax on royalties. Currently, royalties paid by a South African company to residents of the non-treaty countries are subject to a withholding tax of 12%. In addition, there is no withholding tax on dividends, interest or capital gains in Mauritius.

In order to supplement the treaty, the Governments of the two countries are currently negotiating an Investment Promotion and Protection Agreement.

It should be pointed out that Mauritius is one of the few offshore jurisdictions which have a FRC Embassy and this facilitates authentication of corporate documentation in Chinese language".

The content of this article is intended to provide general information on the subject matter. The reader should therefore obtain professional advice specific to their circumstances.