n SA Mercantile Law Journal = SA Tydskrif vir Handelsreg - Dual residence and the proviso : where was tradehold resident?

Volume 26, Issue 3
  • ISSN : 1015-0099
  • E-ISSN: 1996-2185



In 2013, the Income Tax Act was amended to ensure that taxpayers would not escape the 'exit tax'. This 'tax' is imposed when South African residents cease to be tax resident in South Africa and become tax resident in a country with which South Africa has entered into a treaty for the relief of double taxation. The amendment came about as a result of the decision in .

Although the amendment purportedly nullifies the decision in with respect to the application of the 'exit tax', the judgment of the Supreme Court of Appeal is of interest in relation to its stance on the proviso to the definition of 'residence' in the Income Tax Act. The dispute in arose as a result of the insertion of the proviso to the definition of 'residence' in the Income Tax Act. The proviso was added to the definition of 'residence' in the Income Tax Act in 2003 to deal with the problem of potential dual residency. The stated purpose of the proviso is to prevent a taxpayer from having dual tax residency. In terms of this proviso, a taxpayer is deemed to be a non-resident of South Africa when, on the application of a treaty, the taxpayer is deemed to be a resident of the other state who is a party to the treaty.
The questions which this article seeks to analyse, through the facts and judgment of , are whether the proviso to the definition of 'residence' is necessary, and whether the proviso achieves its stated purpose of preventing a taxpayer from reducing its tax burden by using dual residency.

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