FTS Tax Rate Between India and South Africa Under DTAA

Quick answer: Fees for technical services (FTS) share Article 12 with royalties under the India-South Africa DTAA and are capped at 10% under Article 12(2), versus India's domestic rate of 20% under section 207(2) (Table, Sl. No. 2) of the Income-tax Act, 2025 (section 115A of the Income-tax Act, 1961). Article 12(4) defines FTS as payments for managerial, technical or consultancy services, including the provision of technical or other personnel, but excludes payments covered by Article 15 (Dependent Personal Services). There is no "make available" clause in this treaty, so the FTS definition is broad.

Key takeaways:

• FTS treaty rate capped at 10% under Article 12(2), same article and rate as royalties
• No make-available requirement — any managerial, technical or consultancy payment qualifies as FTS, regardless of whether technical knowledge transfers to the recipient
• Domestic rate is 20% under section 207(2) (Table, Sl. No. 2), doubled from 10% by the Finance Act 2023
• FTS connected to a PE in India is taxed as business profits under Article 7 instead, generally at 35%
• Payments for employment-type services under Article 15 are expressly excluded from FTS

Fees for Technical Services (FTS) Tax Rate Between India and South Africa

Article 12 of the India-South Africa DTAA covers fees for technical services in the same provision as royalties, applying the same 10% withholding tax cap. South African engineering, mining-services and management-consulting firms provide substantial technical and advisory input to Indian projects, while Indian IT and professional-services firms deliver technical work into South Africa — the flat 10% rate on both sides keeps the compliance analysis simple compared with treaties that separate FTS into its own article with different conditions.

The India-South Africa Double Taxation Avoidance Agreement (DTAA) was signed at New Delhi on 4 December 1996, together with a Protocol that forms an integral part of the Agreement, and entered into force on 28 November 1997 under Article 28, notified in India by GSR 198(E) dated 21 April 1998. The treaty follows the UN Model Tax Convention, which tends to preserve greater source-State taxing rights than the OECD Model — consistent with the bilateral relationship between two developing, BRICS-partner economies.

A Protocol amending the Agreement was signed at Pretoria on 26 July 2013 and entered into force on 26 November 2014 (notified by the CBDT vide Notification No. 10/2015 / S.O. 316(E) dated 2 February 2015, with retrospective effect from 26 November 2014). This 2013 Protocol replaced Article 25 (Exchange of Information) with the current OECD-standard text, extending information exchange to taxes of every kind and removing bank-secrecy as a ground to refuse information. It made no change to any withholding rate — the rates below have never been amended since 1996.

Both India and South Africa have ratified the Multilateral Instrument (MLI): India deposited its instrument on 25 June 2019 (in force 1 October 2019) and South Africa on 30 September 2022 (in force 1 January 2023). The India-South Africa DTAA is a matched Covered Tax Agreement, and the South African Revenue Service (SARS) has published a synthesised text of the treaty as modified by the MLI, with the Principal Purpose Test (PPT) taking effect for withholding taxes from 1 January 2023 and for other taxes from 1 July 2023. This treaty carries no most-favoured-nation (MFN) clause — unlike some of India's other treaties, no protocol grants an automatic reduction if India later agrees a lower rate with a third OECD country.

Treaty Rate vs Domestic Rate: Detailed Comparison

Domestic Rate (Without DTAA)

Under section 207(2) (Table, Sl. No. 2) of the Income-tax Act, 2025 (section 115A of the Income-tax Act, 1961), fees for technical services paid to a non-resident are withheld at 20% (before surcharge and cess) — doubled from 10% by the Finance Act 2023, effective 1 April 2023. With surcharge and cess, the effective rate for a foreign company can reach roughly 21.84%.

DTAA Rate (With Treaty)

Article 12(2) restricts India's source-State tax on FTS to 10% of the gross amount, provided the South African recipient is the beneficial owner — inclusive of surcharge and cess.

Effective Tax Savings

An Indian manufacturer pays a South African engineering consultancy INR 45 lakh for a plant commissioning advisory project. Without the treaty, TDS at 20% is INR 9 lakh, leaving INR 36 lakh. With the treaty (valid TRC and Form 41), TDS at 10% is INR 4.5 lakh, leaving INR 40.5 lakh — a saving of INR 4.5 lakh on this single engagement.

Who Qualifies for the Reduced Rate

Beneficial Ownership Requirement

The South African service provider must be the beneficial owner of the fee — genuinely rendering the services (directly or through its own personnel) rather than acting as a pass-through for a third-country subcontractor.

Tax Residency

The recipient must be a South African tax resident under Article 4, evidenced by a Tax Residency Certificate from SARS.

Anti-Abuse Rules: MLI PPT and GAAR

As a matched Covered Tax Agreement, the MLI's Principal Purpose Test applies to this treaty from 1 January 2023, alongside India's domestic GAAR and Article 12(2)'s beneficial-ownership test. Interposing a South African entity in a service chain purely to access the 10% rate, with no genuine substance, can be challenged on any of these grounds — this treaty has no MFN clause and no Limitation of Benefits article of its own.

No PE Attribution

Under Article 12(5), the 10% cap does not apply where the South African service provider has a permanent establishment or fixed base in India and the services are effectively connected with it. The FTS is then taxed as business profits under Article 7, generally at the 35% foreign-company rate (cut from 40% effective FY 2024-25 under the Finance (No.2) Act 2024).

FTS-Specific Treaty Provisions Under Article 12

Definition of FTS (Article 12(4))

The treaty defines "fees for technical services" as payments of any kind received as consideration for services of a managerial, technical or consultancy nature, including the provision of services by technical or other personnel, but expressly excluding payments for services covered by Article 15 (Dependent Personal Services). Because there is no make-available requirement, the scope is broader than under treaties like India-USA or India-UK: routine management fees, IT support, consulting engagements, and technical-personnel secondments all fall within FTS under this treaty, whether or not any technical knowledge is transferred to the Indian recipient.

Article 12(6) and 12(7): Source Rule and Arm's Length Rule

FTS is deemed to arise where the payer is resident, or where a connected PE is situated if the payer has one. Where a special relationship inflates the fee above an arm's-length amount, only the arm's-length portion qualifies for the 10% cap, engaging transfer pricing rules for the excess.

Domestic-Law Cross-Reference

Independently of the treaty, FTS income of a non-resident is deemed to accrue in India under section 9(7) of the Income-tax Act, 2025 (section 9(1)(vii) of the Income-tax Act, 1961); the treaty's 10% cap operates as a ceiling on this domestic charging provision.

Documentation Required to Claim the Reduced Rate

Indian payers may apply the 10% treaty rate to fees for technical services paid to a South African resident only once the recipient has provided the documents below; without them, the payer must withhold at the full domestic rate.

Tax Residency Certificate (TRC)

The South African recipient must obtain a Tax Residency Certificate from the South African Revenue Service (SARS), generally through SARS eFiling, confirming South African tax residency for the relevant year. This is the foundational document required under section 159(8) of the Income-tax Act, 2025 (section 90(4) of the Income-tax Act, 1961).

Form 41 (formerly Form 10F)

If the TRC does not carry all prescribed particulars (name, status, nationality, South African tax reference number, and period of residential status), the recipient must also file Form 41 electronically. Since 1 October 2023, Form 41 must be filed on the Indian income-tax e-filing portal even by non-residents without an Indian PAN, through a dedicated non-PAN registration category. Treaty benefit at source is available only once the form is actually filed — it is not automatic on the strength of the TRC alone.

Self-Declaration and No-PE Confirmation

The South African recipient should provide a self-declaration confirming beneficial ownership of the income, that no permanent establishment or fixed base exists in India to which the income is attributable, and that the arrangement has genuine commercial substance rather than being structured principally to access the 10% rate.

Withholding Procedure for Indian Payers

Section 393(2): TDS Obligation

Under section 393(2) of the Income-tax Act, 2025 (Table, Sl. No. 17; section 195 of the Income-tax Act, 1961), any person paying fees for technical services to a non-resident must deduct tax at source at the time of credit or payment, whichever is earlier. The rate is 10% where the South African recipient's DTAA documentation is complete, or the domestic rate if it is not.

Forms 145 and 146 (formerly Forms 15CA and 15CB)

Before remitting the payment to South Africa, the Indian payer must file Form 145 electronically. For remittances exceeding INR 5 lakh in a financial year, a Chartered Accountant must also issue Form 146, certifying the taxability of the payment, the applicable treaty article and rate, and that TDS has been correctly deducted.

Section 395(1): Lower or Nil Withholding Certificate

If the South African recipient's actual Indian tax liability is expected to be lower than the standard withholding, they — the payee, not the Indian payer — may apply to the Assessing Officer for a certificate under section 395(1) of the Income-tax Act, 2025 (section 197 of the Income-tax Act, 1961) authorising a lower or nil rate. The Indian payer's own route, where warranted, is an application under section 395(2) of the Income-tax Act, 2025 (section 195(2) and (3) of the Income-tax Act, 1961) asking the Assessing Officer to determine the proportion of the remittance chargeable to tax.

GST on Imported Services

Fees paid to a South African service provider may separately attract Goods and Services Tax under the reverse charge mechanism: the Indian recipient self-assesses and pays GST at 18% on the import of services, generally available as input tax credit. This GST liability is independent of, and additional to, the income-tax withholding discussed above.

Practical Considerations

Because this treaty has no make-available clause, Indian payers should not assume that a service fee escapes FTS characterisation merely because no technical know-how was transferred — the Article 12(4) definition catches ordinary consultancy and management fees too. Reimbursement of costs for seconded South African personnel, without any margin, is the recurring area of dispute: a payment for personnel provision generally falls within Article 12(4)'s express reference to "provision of services by technical or other personnel," so treating such reimbursements as automatically outside FTS is risky without a considered analysis of the facts.

Practical Example

Pretoria Advisory Group seconds two mining engineers to its Indian joint venture for an 18-month project, with the Indian entity reimbursing salary costs of INR 40 lakh plus a 6% administrative mark-up (INR 2.4 lakh), totalling INR 42.4 lakh.

• Without DTAA: TDS at 20% = INR 8.48 lakh; Pretoria Advisory Group receives INR 33.92 lakh.
• With DTAA (valid TRC and Form 41): TDS at 10% = INR 4.24 lakh; Pretoria Advisory Group receives INR 38.16 lakh.
• Saving: INR 4.24 lakh on this secondment arrangement.

See our India-South Africa DTAA guide for the full treaty picture and our withholding tax rates page for royalties, interest and dividends alongside FTS. Beacon Filing's India entry strategy team can help structure cross-border service arrangements between India and South Africa efficiently.

Frequently Asked Questions

What is the FTS tax rate under the India-South Africa DTAA?

Article 12(2) caps fees for technical services at 10% of the gross amount, the same article and rate as royalties. India's domestic rate without the treaty is 20% under section 207(2) (Table, Sl. No. 2) of the Income-tax Act, 2025 (section 115A of the Income-tax Act, 1961).

Does the India-South Africa DTAA have a 'make available' clause for FTS?

No. Article 12(4) has no make-available requirement, so any payment for managerial, technical or consultancy services qualifies as FTS, whether or not technical knowledge is transferred to the Indian recipient. This makes the FTS scope broader than under treaties like India-USA or India-UK.

What types of payments qualify as FTS under this treaty?

Payments for services of a managerial, technical, or consultancy nature, including the provision of technical or other personnel (secondments), all qualify as FTS under Article 12(4). Payments for services covered under Article 15 (dependent personal services/employment) are expressly excluded from the FTS definition.

What happens if the FTS is connected to a permanent establishment in India?

Under Article 12(5), the 10% cap does not apply if the services are effectively connected with a permanent establishment the South African provider has in India. The fee is then taxed as business profits under Article 7, generally at the 35% foreign-company rate.

Is GST also applicable on FTS payments to South Africa?

Yes. Import of services from a South African provider attracts GST at 18% under the reverse charge mechanism, self-assessed and paid by the Indian recipient and generally available as input tax credit. This is separate from and additional to income-tax withholding.

What documentation is needed to claim the 10% FTS rate?

A Tax Residency Certificate from SARS, Form 41 filed electronically, and a self-declaration of beneficial ownership and no-PE status, plus the service agreement describing the scope of work. The Indian payer must file Form 145 (and Form 146 for remittances exceeding INR 5 lakh) before remitting.