n Comparative and International Law Journal of Southern Africa - Resolving double taxation : the concept 'place of effective management' analysed from a South African perspective

Volume 41, Issue 1
  • ISSN : 0010-4051



In order to prevent the double taxation of income of an entity that is deemed resident in two different countries, the OECD has a tie-breaker rule that is intended to ensure that the residence of a such a "dual resident" entity is allocated to the country in which its "place of effective management" is situated. The OECD considers the "place of effective management" as the place where the key management and commercial decisions of an entity's business are made. However, technological advancements, in particular the growth on e-commerce, have fundamentally changed the way businesses are run. With the evolving communications technology, it is no longer necessary for a group of persons to be physically located or to meet in one place to hold discussions thus making it difficult to determine a single place of effective management. This article analyses the challenges e-commerce poses to the concept "place of effective management". The article points out the fact that the effectiveness of this concept in preventing double taxation of income, further limited by the lack of an international meaning of the concept. In light of the above issues, the article suggests recommendations, from a South African perspective, that could ensure the effectiveness of the concept as a tie breaker rule.

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