n Business Tax and Company Law Quarterly - Residence revisited

Volume 1, Issue 3
  • ISSN : 2219-1585


The purpose of this article is to explore the issue of corporate tax residence for South African businesses which are established or managed in more than one jurisdiction. As a starting point the article explores the tests for corporate residence in South Africa and the United Kingdom respectively. It then deals with the issue of dual residence, possible double taxation and the tie-breaker provisions of a double-taxation agreement, which contains its own concept of residence. The article highlights the differences in the tests for residence under the national laws of South Africa and those in the UK. The South African test of 'effective management' has not been considered by the South African courts, but the South African Revenue Service has provided some guidance to interpretation. In the UK the test is whether the company is 'centrally managed and controlled' in that country. Case law has developed a useful precedent to consider against the guidance given by HM Revenue and Customs. In respect of dual residence, the article reviews the relevant SA-UK double-taxation agreement and its tie-breaker provisions, and considers recent UK case law on the interpretation of the concept of 'place of effective management', which is usually found in the UK double-taxation agreements. Finally, thought is given to how South African companies should take care to protect themselves from attracting residence status in another jurisdiction where they do not wish to be taxed, or in a jurisdiction where double taxation may result with no means of relief. Consideration is also given to practical steps to prevent residence and tax liability in the UK, for companies conducting their affairs in that country.

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