Poor infrastructure is often the leading cause for developing countries being targeted by foreign corporations or individuals absconding from their tax liability. This results in developing countries being treated as "tax havens". South Africa is no different, unless double taxation agreements ("DTA") are in place, the South African Revenue Service ("SARS") will be unable to recover taxes owed by foreign companies or individuals conducting business activities within South Africa, the effect of which can stunt the growth of any impoverished nation.


The Republic of South Africa, being dubbed "the gateway to Africa", has taken some precautions in preventing foreign companies or individuals from taking advantage of the disadvantaged. In terms of section 231 of the Constitution of the Republic of South Africa, Act 108 of 1996, international agreements are regarded as law within the country. In this regard, South Africa has entered into a number of double taxation agreements with foreign countries in order to assist with tax recovery. In addition section 93(4) of the Income Tax Act, 58 of 1962 "recognises that other states may assist SARS in collecting amounts due to SARS" (BJ Croome, Taxpayers' Rights in South Africa page 47) .

In order for SARS to request assistance in the recovery of taxes owed by a foreign company or an individual, specific requirements in terms of the respective DTA have to be met. DTA's, in general, require that:

  • the amount requested for recovery be determined by the laws of South Africa and be accompanied by a certificate from SARS;
  • the method of collection or extent of collection will be in terms of the domestic law of the foreign country;
  • the assistance by the foreign country must not have priority over taxes owed in the foreign state;
  • where the tax claimed have not been finally determined, South Africa can request the foreign country to take interim measurers in order to protect its claim; and
  • a request can only be made by South Africa provided there are insufficient assets within the country to satisfy the taxes



In the event that South Africa does not have a DTA with a country or a DTA does exist, but does not provide for the assistance in the recovery of taxes, SARS would be prevented from requesting assistance. The effect of this is that a corporation or an individual resident in such a country, enters South Africa with the intention to evade or unintentionally fails to account for tax and subsequently returns to their country of residence. Such an entity or individual cannot be compelled to repay the amount owed, provided that they do not have immovable or movable property within the Republic.  

In addition, where a country has a DTA with South Africa and such DTA provides for tax recovery, SARS is limited to recover the taxes specified in terms of the DTA, to the extent that the tax is recoverable in terms of the foreign country's domestic law.  

In general, DTAs provide that SARS can request the assistance from a foreign country for the recovery of income tax, capital gains tax, secondary tax on companies, non-resident shareholder's tax, withholding tax on royalties and interest and penalties imposed on taxes outstanding.


Presently, South Africa has 69 signed DTAs and surprisingly 51 do not provide for assistance with tax recovery with the most recent DTA having being signed in 2009. As interest in emerging markets has increased, SARS, along with the international community, should re-evaluate current DTA provisions in order to prevent tax leakage. The use of tax recovery provisions is not only a benefit to South Africa but also provides assistance to foreign countries requesting tax owed by South African residents.