In this alert:
Tax Policy Brief - International Tax: Services -Taxing Rights
Withholding tax - cross border services:
- The withholding tax rate applied to non-residents (of 15% of the gross consideration) is a high rate (when compared to the tax basis for residents (of 30% income tax on profits)).
- The extra-territorial scope of this withholding tax (which now also covers services performed outside the country) can result in increased costs for local businesses consuming foreign services as the foreign service provider will normally gross up their consideration for this tax cost.
- Although Double Tax Agreements (DTA) should help alleviate the double taxation costs, there are relatively few DTAs in place and in practice the local application of DTA provisions is an area of contention.
