Chairperson, the United Kingdom of Great Britain and Northern Ireland remains one of South Africa's key foreign direct investors. These direct investments do not only have the potential to boost the country's trade balance with the United Kingdom but also have the potential to lead to trade creation within South Africa. South Africa is fourth on the list of key emerging markets for global investors, with a wealth of opportunities for United Kingdom expertise across almost every sector of the economy, including access to the rest of Africa's more than 300 million customers. The United Kingdom is in South Africa's "premier league" of trading partners, with annual bilateral trade of over 8 billion.
The purpose of this agreement is to avoid double taxation and fiscal evasion with respect to taxes on income and capital gains derived within these two countries. It is a common practice in most countries for taxes to be imposed on the worldwide income derived by residents of the country and on income derived by nonresidents who reside in the country. The effect of such a system is that income derived by a resident of one country from a source in another country is subject to tax in both countries. That would clearly discourage foreign investments.
It is normal for countries that have trade relations to conclude double taxation agreements. Such agreements commonly provide that income of a particular nature will either be taxed in only one of the countries or may be taxed in both countries, with one of them allowing a credit for the tax imposed by the other.
This is a bilateral protocol that is intended to amend the Convention between the Contracting Governments for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income and on Capital Gains, signed at London on 4 July 2002.
The Select Committee on Finance, having considered the request for approval by Parliament of the Protocol between the Government of the Republic of South Africa and the Government of the United Kingdom of Great Britain and Northern Ireland to amend the Convention for Avoidance of Double Taxation and Prevention of Fiscal Evasion with respect to Taxes on Income and on Capital Gains, recommends that the House, in terms of section 231(2) of the Constitution, approves said protocol.
Debate concluded.
Question put: That the Report be adopted.
IN FAVOUR: Eastern Cape, Free State, Gauteng, KwaZulu-Natal, Limpopo, Mpumalanga, Northern Cape, North West, Western Cape.
Report accordingly adopted in accordance with section 65 of the Constitution.