A company is resident in South Africa if it is incorporated, established, or formed in South Africa or has its place of effective management in South Africa. However, a company that is deemed to be exclusively resident in another country in terms of a double taxation agreement (DTA) is excluded from SA residency.
In terms of an Interpretation Note issued by the South African Revenue Service (SARS), the place of effective management is regarded as the place where key management and commercial decisions that are necessary for the conduct of its business as a whole are, in substance, made. This approach is consistent with internationally accepted principles.
Permanent establishment (PE)
South Africa does not, as a general rule, tax non-residents on the basis of having a PE in South Africa. Rather, non-residents are subject to income tax in South Africa on income derived from a South African source. The South African source rules deem income from the disposal of movable property that is effectively connected with a South African PE (as defined from time to time in the Organisation for Economic Co-operation and Development [OECD] Model Tax Convention) to be from a South African source.
Non-residents are subject to tax on capital gains realised on the disposal of any asset effectively connected with a South African PE (as defined from time to time in the OECD Model Tax Convention) of the person.