Bizarre tax treaty could let the Guptas leave SA with billions: report

The Gupta family sought advice on how to move tens of billions of rands to the United Arab Emirates, revealing the enormous size of their empire, according to a report by the Sunday Times.

The treaty which came into effect in March this year, stops the South African Revenue Service (SARS) from taxing high net worth individuals on their global incomes and assets should they become UAE residents – simply by obtaining a three-year residency permit.

While it allows SARS to claim a one-off 18% exit tax on South Africans’ local assets and income when they leave the country, SARS loses all taxing rights thereafter.

The treaty has been labelled “unusual” by tax specialists due to tax benefits being obtained simply by acquiring a Dubai residency visa, said the Sunday Times.

Several members of the Gupta family are currently residents in the UAE while the president’s son, Duduzane Zuma, who owns a Dubai flat, obtained his three-year UAE residency permit in October 2015.

Although industry experts said the treaty went against international best practices and South Africa’s obligations to global financial co-operation agreements, the Presidency insists it is of mutual benefit to both countries.

In timing with the new treaty coming into effect, the Gupta family reportedly approached a number of top South African law firms for advice on how to go about moving tens of billions of rands into the UAE.

Last year’s Sunday Times Rich List listed Atul Gupta as South Africa’s seventh-wealthiest person, with a South African fortune of R7.6 billion.

Speaking to the Sunday Times, a government tax specialist with intimate knowledge of the UAE treaty — but who is not authorised to speak to the media — said it went against international norms and standards.

“It provides full tax benefits to Dubai residents even though Dubai is a tax haven. Anyone with a three year residence permit is automatically a tax resident of Dubai under their laws.”

“Even if such a person is also a tax resident in South Africa, the treaty’s tie-breaker test deems the person to be a Dubai resident if their ‘centre of vital interests’ [such as homes or families] is in Dubai. South Africa is then prevented by the treaty from taxing such a person on a global basis,” the specialist said.

“On the face of it, it looks normal but, coupled with Dubai laws, it gives unusual benefits.”