Double Tax Agreement Between South Africa and Ghana: What You Need to Know
South Africa and Ghana are two countries with strong economic ties. As a result, it is not surprising that they have signed a double tax agreement to prevent income from being taxed twice and promote cross-border investment. In this article, we will explore what the double tax agreement between South Africa and Ghana entails.
What is the Double Tax Agreement?
A double tax agreement (DTA) is an agreement between two countries that eliminates the possibility of double taxation for taxpayers who earn income in both countries. The agreement sets out the tax rules to be applied when income is earned in both countries. In other words, the DTA ensures that taxpayers do not pay tax twice on the same income.
The Double Tax Agreement between South Africa and Ghana
The double tax agreement between South Africa and Ghana was signed on 25 November 2013 and became effective on 1 January 2015. The agreement covers the following taxes:
– In South Africa: the normal tax (personal income tax, corporate income tax, and withholding tax on dividends, interest, and royalties);
– In Ghana: the income tax (personal income tax and corporate income tax)
The double tax agreement applies to residents of both South Africa and Ghana who earn income in both countries.
Benefits of the Double Tax Agreement
The double tax agreement between South Africa and Ghana has several benefits, including:
1. Avoidance of double taxation: The double tax agreement ensures that taxpayers who earn income in both countries do not pay tax twice on the same income. This helps to avoid double taxation and promotes cross-border investment.
2. Reduced withholding tax rates: The agreement reduces withholding tax rates on dividends, interest, and royalties. For instance, the withholding tax rate on dividends is reduced from 15% to 5%, while the withholding tax rate on interest is reduced from 15% to 8%.
3. Prevention of tax evasion: The agreement helps to prevent tax evasion by ensuring that taxpayers pay tax on their income in the country where the income is earned.
The double tax agreement between South Africa and Ghana is a significant step towards strengthening economic ties between the two countries. The agreement ensures that taxpayers who earn income in both countries do not pay tax twice on the same income. This helps to promote cross-border investment and prevent tax evasion. As a resident of either South Africa or Ghana, it is essential to be aware of the agreement`s provisions to avoid being taxed twice on the same income.