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October 22, 2024 – New York
At the UN-hosted Summit on Market Investment and Cultural Exchange, renowned tax and cross-border affairs expert Harry Yang highlighted the critical impact of U.S.-Africa tax treaties on businesses. He emphasized that these treaties play a vital role in reducing double taxation and lowering withholding tax rates, fostering a more business-friendly environment for cross-border investments.
Harry Yang pointed out that the U.S. has established tax treaties with Egypt, Morocco, South Africa, and Tunisia, significantly reducing the standard 30% withholding tax rate. For instance, under the U.S.-South Africa treaty, South African shareholders may enjoy a reduced dividend tax rate of 5% if they own more than 10% of a U.S. company, or 15% if their ownership is below that threshold. “These provisions reduce the tax burden on businesses and encourage more investment between the U.S. and African markets,” he noted.
Harry Yang also stressed the importance of the Permanent Establishment (PE) rules within these treaties, which determine when businesses become liable for U.S. taxes. “A foreign company is only subject to U.S. corporate income tax if it has a physical office or an authorized agent in the U.S.,” Harry Yang explained. This framework allows foreign businesses to engage in the U.S. market without triggering tax obligations, as long as they avoid establishing a PE.
“For example, a Moroccan consulting firm serving U.S. clients does not create a PE—and thus avoids U.S. taxation—if it doesn’t have a U.S. office or a contract-signing agent,” Harry explained. “This rule is crucial for minimizing tax risks for companies with temporary or limited U.S. activities.”
Harry Yang also discussed the potential impact of the upcoming U.S. election on corporate tax policy. Donald Trump has proposed lowering the corporate tax rate to 15%, while Kamala Harris advocates raising it to 25%. Additionally, the OECD's global tax framework—specifically, the introduction of a global minimum tax—could significantly impact multinational companies, making it a crucial development to monitor.
Amid these uncertainties, Harry advised companies to remain agile and plan proactively. “Businesses must work closely with their advisors to assess potential policy shifts and optimize their cross-border structures to minimize tax burdens and manage operational risks,” he said.
Harry Yang’s insights offered valuable guidance for businesses seeking to expand across U.S. and African markets. He emphasized that a solid understanding of tax treaties and PE rules not only reduces tax costs but also enables companies to grow efficiently and sustainably in international markets.
