NOTICE INCOME TAX ACT, 1962 CONVENTION BETWEEN …

1 NOTICENo. 15 December 1997 INCOME TAX ACT, 1962 CONVENTION BETWEEN THE republic OF SOUTH AFRICA AND THE UNITED STATES OFAMERICA FOR THE AVOIDANCE OF DOUBLE TAXATION AND THE PREVENTION OF FISCALEVASION WITH RESPECT TO TAXES ON INCOME AND CAPITAL GAINSIn terms of section 108(2) of the INCOME Tax Act, 1962 (Act No 58 of 1962), read in conjunctionwith section 231(4) of the Constitution of the republic of South Africa, 1996 (Act No 108 of1996), it is hereby notified that the CONVENTION for the avoidance of double taxation and theprevention of fiscal evasion with respect to taxes on INCOME an capital gains set out in theSchedule to this NOTICE has been entered into with the United States of America and has beenapproved by Parliament in terms of section 231(2)

2 Of the BETWEEN THE republic OF SOUTH AFRICA AND THE UNITED STATES OFAMERICA FOR THE AVOIDANCE OF DOUBLE TAXATION AND THE PREVENTION OF FISCALEVASION WITH RESPECT TO TAXES ON INCOME AND CAPITAL GAINS The Government of the republic of South Africa and the Government of the United States ofAmerica desiring to promote and strengthen the economic relations BETWEEN the two countries Have agreed as follows:Article 1 General Scope CONVENTION shall apply only to persons who are residents of one or both of theContracting States, except as otherwise provided in the CONVENTION .

3 CONVENTION shall not restrict in any manner any benefit now or hereafter accorded:a)by the laws of either Contracting State; orb)by any other agreement BETWEEN the Contracting States. the provisions of subparagraph 2b):a)the provisions of Article 25 (Mutual Agreement Procedure) of this Conventionexclusively shall apply to any dispute concerning whether a measure is withinthe scope of this CONVENTION , and the procedures under this Conventionexclusively shall apply to that dispute; andb)unless the competent authorities determine that a taxation measure is notwithin the scope of this CONVENTION , the non-discrimination obligations of thisConvention exclusively shall apply with respect to that measure, except for suchnational treatment or most-favoured-nation obligations as may apply to trade ingoods under the General Agreement on Tariffs and Trade.

4 No nationaltreatment or most-favoured-nation obligation under any other agreement shallapply with respect to that )For the purpose of this paragraph, a "measure" is a law, regulation, rule,procedure, decision, administrative action, or any other form of measure. any provision of the CONVENTION except paragraph 5, the United Statesmay tax its residents (as determined under Article 4 (Residence)), and by reason of citizenshipmay tax its citizens, as if the CONVENTION had not come into effect. For this purpose, the term"citizen" shall include a former citizen or long-term resident whose loss of such status had asone of its principal purposes the avoidance of tax (as defined under the laws of the UnitedStates), but only for a period of ten years following such loss.

5 Provisions of paragraph 4 shall not effect:a)the benefits conferred by a Contracting State under paragraph 2 of Article 9(Associated Enterprises), paragraphs 2, 4, 5, 6 and 7 of Article 18 (Pensions andAnnuities), and under Articles 23 (Elimination of Double Taxation), 24(Non-Discrimination), and 25 (Mutual Agreement Procedure); andb)the benefits conferred by a Contracting State under Articles 19 (GovernmentService), 20 (Students, Apprentices and Business Trainees), and 27 (DiplomaticAgents and Consular Officers), upon individuals who are neither citizens of, norhave been admitted for permanent residence in, that 2 Taxes Covered existing taxes to which the CONVENTION shall apply are in particular:a)in the United States.

6 The Federal INCOME taxes imposed by the Internal RevenueCode of 1986 (but excluding social security taxes), and the Federal excise taxesimposed with respect to private foundations;(hereinafter referred to as "United States tax");b)in South Africa:i)the normal tax;ii)the secondary tax on companies;(hereinafter referred to as "South African tax"). CONVENTION shall also apply to any identical or substantially similar taxes which areimposed after the date of signature of the CONVENTION in addition to, or in place of, theexisting taxes. The competent authorities of the Contracting States shall notify each other ofany significant changes that have been made in their respective taxation laws or other lawsaffecting their obligations under the CONVENTION , and of any official published materialconcerning the application of the CONVENTION , including explanations, regulations, rulings, orjudicial 3 General Definitions this CONVENTION , unless the context otherwise requires:a)i)the term "United States" means the United States of America.

7 Andii)when used in a geographical sense, the term "United States" means theStates thereof and the District of Columbia. Such term also includes:aa)the territorial sea thereof;bb)the seabed and subsoil of the adjacent submarine areas beyondthe territorial sea over which the United States exercises sovereignrights in accordance with international law for the purpose ofexploration and exploitation of the natural resources of such areas,but only to the extent that the person, property or activity towhich this CONVENTION is being applied is connected with suchexploration or exploitation.

8 B)the term "South Africa" means the republic of South Africa and, when used in ageographical sense, includes the territorial sea thereof as well as any areaoutside the territorial sea which has been or may hereafter be designated, underinternational law and the laws of South Africa, as areas within which South Africamay exercise sovereign rights or jurisdiction with regard to the exploration orexploitation of natural resources;c)the term "person" includes an individual, an estate, a trust, a partnership, acompany and any other body of persons;d)the term "company" means any body corporate or any entity which is treated asa company or body corporate for tax purposes according to the laws of theContracting State in which it is organised;e)the terms "enterprise of a Contracting State" and "enterprise of the otherContracting State" mean respectively an enterprise carried on by a resident of aContracting State and an enterprise carried on by a resident of the otherContracting State.

9 F)the term "nationals" means all individuals having the citizenship of a ContractingState and all legal persons, partnerships, associations and other entities derivingtheir status as such from the laws in force in a Contracting State;g)the term "competent authority" means:i)in the case of the United States, the Secretary of the Treasury or hisdelegate; andii)in the case of South Africa, the Commissioner for Inland Revenue or hisauthorised representative;h)the term "international traffic" means any transport by a ship or aircraft, exceptwhen such transport is solely BETWEEN places in a Contracting State.

10 Regards the application of this CONVENTION at any time by a Contracting State anyterm not defined therein shall, unless the context otherwise requires or the competentauthorities agree to a common meaning pursuant to the provisions of Article 25 (MutualAgreement Procedure), have the meaning which it has at that time under the law of that Stateconcerning the taxes to which the CONVENTION applies, any meaning under the applicable taxlaws of that State prevailing over a meaning given to the term under other laws of that 4 Residence the purposes of this CONVENTION the term "resident of a Contracting State" means.