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Characterisation for treaty purposes of manufactured dividends received in terms of securities lending arrangements
Equity securities lending arrangements are contracts whereby a shareholder lends his shares to a borrower for a period of time. If dividends are declared during that period, these accrue to the borrower, and the borrower pays a manufactured dividend to the lender as compensation. The applicable inco...
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| Format: | Thesis |
| Language: | English |
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Department of Finance and Tax
2021
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| _version_ | 1867614033960501248 |
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| access_status_str | Open Access |
| author | Vanlierde, Angela |
| author2 | West, Craig |
| author_browse | Vanlierde, Angela West, Craig |
| author_facet | West, Craig Vanlierde, Angela |
| author_sort | Vanlierde, Angela |
| collection | Thesis |
| description | Equity securities lending arrangements are contracts whereby a shareholder lends his shares to a borrower for a period of time. If dividends are declared during that period, these accrue to the borrower, and the borrower pays a manufactured dividend to the lender as compensation. The applicable income tax legislation deems manufactured dividends to be dividends for purposes of dividends tax. However, unless manufactured dividends are governed by Article 10 of a double tax treaty, South Africa may not have the right to tax manufactured dividends received by non-resident lenders. This would result in a loss of revenue for the South African fiscus. This paper examined the qualification or characterisation for treaty purposes of manufactured dividend income earned by lenders in terms of securities lending arrangements. This examination was done through an analysis of the ‘dividends' definition in Article 10 of the 2017 OECD model convention. It was found that manufactured dividends are not ‘dividends' for treaty purposes, and are instead business income in terms of Article 7. South African domestic tax legislation was analysed, together with publications by the South African Revenue Service and National Treasury, and demonstrated that there is a risk of taxation not in accordance with the provisions of a convention, as well as a risk of revenue losses to the South African fiscus where a non-resident lender has no permanent establishment in South Africa. |
| format | Thesis |
| id | oai:open.uct.ac.za:11427/32781 |
| institution | University of Cape Town (South Africa) |
| language | eng |
| last_indexed | 2026-06-10T12:45:37.148Z |
| license_str | Not specified — see source repository |
| provenance_str_mv | Harvested via OAI-PMH from UCTD — University of Cape Town Open Access Repository |
| publishDate | 2021 |
| publishDateRange | 2021 |
| publishDateSort | 2021 |
| publisher | Department of Finance and Tax |
| publisherStr | Department of Finance and Tax |
| record_format | dspace |
| source_str | UCTD — University of Cape Town Open Access Repository |
| spelling | oai:open.uct.ac.za:11427/32781 Characterisation for treaty purposes of manufactured dividends received in terms of securities lending arrangements Vanlierde, Angela West, Craig International Taxation Equity securities lending arrangements are contracts whereby a shareholder lends his shares to a borrower for a period of time. If dividends are declared during that period, these accrue to the borrower, and the borrower pays a manufactured dividend to the lender as compensation. The applicable income tax legislation deems manufactured dividends to be dividends for purposes of dividends tax. However, unless manufactured dividends are governed by Article 10 of a double tax treaty, South Africa may not have the right to tax manufactured dividends received by non-resident lenders. This would result in a loss of revenue for the South African fiscus. This paper examined the qualification or characterisation for treaty purposes of manufactured dividend income earned by lenders in terms of securities lending arrangements. This examination was done through an analysis of the ‘dividends' definition in Article 10 of the 2017 OECD model convention. It was found that manufactured dividends are not ‘dividends' for treaty purposes, and are instead business income in terms of Article 7. South African domestic tax legislation was analysed, together with publications by the South African Revenue Service and National Treasury, and demonstrated that there is a risk of taxation not in accordance with the provisions of a convention, as well as a risk of revenue losses to the South African fiscus where a non-resident lender has no permanent establishment in South Africa. 2021-02-04T13:47:14Z 2021-02-04T13:47:14Z 2020 2021-02-04T05:32:13Z Master Thesis Masters MCom http://hdl.handle.net/11427/32781 eng application/pdf Department of Finance and Tax Faculty of Commerce |
| spellingShingle | International Taxation Vanlierde, Angela Characterisation for treaty purposes of manufactured dividends received in terms of securities lending arrangements |
| thesis_degree_str | Master's |
| title | Characterisation for treaty purposes of manufactured dividends received in terms of securities lending arrangements |
| title_full | Characterisation for treaty purposes of manufactured dividends received in terms of securities lending arrangements |
| title_fullStr | Characterisation for treaty purposes of manufactured dividends received in terms of securities lending arrangements |
| title_full_unstemmed | Characterisation for treaty purposes of manufactured dividends received in terms of securities lending arrangements |
| title_short | Characterisation for treaty purposes of manufactured dividends received in terms of securities lending arrangements |
| title_sort | characterisation for treaty purposes of manufactured dividends received in terms of securities lending arrangements |
| topic | International Taxation |
| url | http://hdl.handle.net/11427/32781 |
| work_keys_str_mv | AT vanlierdeangela characterisationfortreatypurposesofmanufactureddividendsreceivedintermsofsecuritieslendingarrangements |