Tax Residence of Mobile South Africans

• Author: Doelie Lessing
• DOI: 10.10520/ejc-btclq_v13_n2_a3
• Published date: 01 June 2022
• Date: 01 June 2022
• Pages: 9-17

9

© Siber ink

Tax Residence of Mobile South

Africans

DOELIE LESSING*

AbstrAct

The tax residence status of natural persons determines, to a signif‌icant extent,

their liability to tax in South Africa. The South African tax legislation def‌ines

the term ‘resident’ for natural persons with reference to two tests, but subject

to a general override in favour of a person’s treaty residence.

In this article the author summarises how a UK tax court recently unscram-

bled the taxpayer’s complicated lifestyle pattern, interests and relationships

to conclude that the association which the taxpayer had with South Africa

outweighed the (also signif‌icant) ties he shared with the UK, such that he was

found to be treaty resident in South Africa.

The judgment demonstrates just how fact-specif‌ic, intrusive, holistic and

personal such an exercise is, and how thin and brittle the line between two

jurisdictions could potentially be.

The author submits that the detailed approach of the court was correct,

and that the factors considered were relevant and the f‌indings of the court

were correct in the circumstances. The court maintained an appropriate

balance between the hard facts of the matter and the more subjective rela-

tionships which serve to indicate where the taxpayer’s heart really was.

Introduction: Statutory tax residence

Two statutory tests are applied to determine the tax residency of a natural

person, namely the ordinarily resident test, and the presence test (para-

graph (a) of the def‌inition of ‘resident’ in section 1(1) of the Income Tax

Act, 1962 — ‘the Act’). However, where a person is deemed to be exclusively

a tax resident of another country for purposes of the application of any

agreement entered into between South Africa and another country for the

avoidance of double taxation (‘DTA’), such natural person will, notwith-

standing the application of either statutory residency test, not be regarded

as a tax resident of South Africa (‘DTA test’ — exclusion to paragraph (a) of

the def‌inition of ‘resident’).

Ordinarily resident

A person who is ordinarily resident in South Africa becomes a tax resident

in South Africa from the date in the tax year in which the person becomes

ordinarily resident — unlike the physical presence test where the taxpayer

* Director, Werksmans Attorneys. This an expanded version of a similar article

recently published by Werksmans.