African tax treaties are in flux. Governments are rewriting terms to capture more revenue from cross-border payments, with special focus on withholding tax on dividends. For investors, funds, and corporates, this shift means past treaty assumptions no longer hold.
ATAF’s New Model and Dividend WHT Focus
The African Tax Administration Forum (ATAF) is updating its Model Tax Agreement. Unlike the OECD framework, ATAF favours source-based taxation. Dividend WHT provisions increasingly support the country where the income arises rather than the investor’s residence.
Expect tighter beneficial-ownership rules, higher shareholding thresholds for reduced rates, and explicit treatment of investment funds. ATAF’s direction is clear: relief from withholding tax on dividends will only apply when genuine economic activity exists.
MLI and the Principal Purpose Test in Dividend WHT
The BEPS Multilateral Instrument (MLI) has reshaped treaty practice. South Africa, Mauritius, and others have implemented it, making the Principal Purpose Test (PPT) a hurdle for dividend WHT relief.
Tax authorities can now deny lower rates if they believe a structure’s main purpose is tax advantage. Investors cannot rely on rate tables alone. Documentation and governance must prove commercial substance behind dividend distributions.
ECOWAS Treaty Framework: Harmonisation of Dividend Tax
Regional cooperation is emerging. ECOWAS has advanced a treaty framework to cap dividend tax within the bloc at 10%. Nigeria has ratified, but most member states still need to finalise domestic processes.
For now, the 10% ceiling is only a roadmap. Once enforced, it may create consistency for investors in West Africa. Until then, withholding tax on dividends remains fragmented, and careful monitoring is essential.
Treaty Terminations: Dividend WHT Stability Under Pressure
Stability is eroding. Zambia terminated its treaty with Mauritius in 2020, citing revenue loss from dividend, interest, and royalty flows. That corridor had long provided reduced dividend WHT rates, but once cancelled, domestic rates applied immediately.
Burkina Faso has also ended its treaty with France. Relief on dividend tax under that agreement expires in 2025. These moves show African states will walk away from treaties if they believe taxing rights are unbalanced.
Domestic Rules Changing Dividend Tax Processes
Even when treaty rates remain, domestic reforms add complexity. Kenya shortened its WHT remittance deadline to five working days. This change did not alter percentages but compressed compliance windows and altered cash-flow planning.
Such reforms reveal a wider trend: African authorities want quicker access to withholding tax on dividends. Investors must now manage compliance in real time, not retrospectively.
South Africa and Mauritius: Dividend WHT Baselines with New Conditions
South Africa imposes a 20% dividend tax domestically, with many treaties cutting this to 5% or 10% depending on shareholding. However, the MLI now filters access. Beneficial-ownership tests and PPT reviews apply before treaty relief is granted.
Mauritius remains central to African investment, but its treaties are also shaped by the MLI. Relief on dividend WHT is still possible, but authorities now scrutinise whether holding companies have substance beyond form.
Practical Steps for Managing Withholding Tax on Dividends
To secure lower rates, investors must prove substance. Holding companies should have decision-making power, documented board activity, and real staff. Without this, dividend WHT relief may be refused.
Timing is also critical. The date of dividend declaration can decide whether old or new treaty rules apply. Tax teams must track synthesised texts, MLI updates, and domestic reforms before distributions.
Investment funds should proactively demonstrate eligibility. Engaging with tax authorities upfront often prevents disputes later.
Looking Ahead: Dividend WHT in Africa by 2026
Expect more renegotiations that give source countries greater taxing rights. Dividend WHT relief will favour long-term and substantial holdings rather than portfolio investors.
Anti-abuse enforcement will intensify. Treaty shopping will face rejection, and holding companies lacking real activity will lose access to reduced rates. While ECOWAS may bring some regional uniformity, overall, withholding tax on dividends in Africa is moving toward stricter enforcement.
Conclusion: Dividend WHT Planning Requires Active Management
Dividend tax outcomes across Africa are shifting rapidly. Treaty provisions are tightening, anti-abuse tests are enforced, and compliance timelines are accelerating. Investors who fail to adapt risk significant dividend WHT leakage.
Global Tax Recovery supports investors by tracking treaty changes, interpreting MLI impacts, and managing refund claims. Our expertise helps clients secure rightful relief while remaining compliant. In today’s environment, proactive management of withholding tax on dividends is the only strategy that works.
