Most Read Contributor in South Africa, September 2016
Individuals emigrating from South Africa have often been under
the impression that once they have left, they are then no longer
liable to pay taxes in South Africa. Repeatedly they receive
informal advice from fellow emigrants stating that, provided they
remain out the country for a certain number of days following their
exit, that they will have terminated their South African tax
The recent UK Supreme Court judgment in the case of Robert
John Davies, Michael John James and Robert Gaines-Cooper v
HMRC  UKSC 47, highlights that a mere absence
from your home country for determined periods subsequent to exit is
not sufficient for the purposes of breaking residency, but rather
that an emigrant must display a distinct break from his home
It is inevitable that many South Africans who choose to emigrate
will maintain some connections to South Africa, be it through
family, friends or business. The question therefore remains, just
how much must an emigrant sever ties in his home country before he
will be deemed to have made a 'distinct break' and lost his
tax residence status.
South African concept of residency
A resident, for South African tax purposes, is defined in
section 1 of the Income Tax Act 58 of 1962 (the "Act"),
in the case of individuals, as any person who is either ordinarily
resident here, or qualifies as a resident in terms of the
"physical presence test."
The Act provides that an individual who spends more than 91 days
per tax year over a period of 6 tax years and 915 days in aggregate
over the five preceding tax years in South Africa, will be deemed
to be tax resident in terms of the physical presence test. Such an
individual will no longer be considered to be tax resident here if
he spends a continuous period of 330 full days outside of South
Africa, immediately after the day on which he ceased to be
physically present in South Africa.
Individuals who choose to emigrate from South Africa for
exchange control purposes are regarded as non-resident for exchange
control purposes with effect from the date of emigration disclosed
to the South African Reserve Bank. To cease being ordinarily
resident in South Africa for tax purposes is, however, not quite as
simple and requires that an individual break not only his physical
presence as required in the physical presence test above, but his
ordinary residence too.
The Act does not define the term "ordinarily
resident". The South African courts have, however, interpreted
the term to mean the country to which a person would 'naturally
and as a matter of course return from his wanderings'. The
question of whether an individual is ordinarily resident in South
Africa is therefore one of fact and degree.
The case law on the meaning of the statutory terms
"resident" and "ordinarily resident", for the
purposes of the Act, is not extensive. In the United Kingdom
("the UK"), where the primary nexus or connecting factor
for the incidence of tax is the "residence" or
"ordinary residence" and in some instances the
"domicile" of an individual, some useful tests have
evolved from a long line of decided cases, the most recent being
the Supreme Court judgement in the Gaines-Cooper case which was
dismissed on appeal from the UK Court of Appeal. Although UK cases
are not binding in South Africa, they may have persuasive value and
provide some guidance on the criteria which could be applied where
an individual ceases to be ordinarily resident in South Africa.
Briefly, by way of background, the case concerned two sets of
appellants who claimed to have left the UK permanently and to have
become tax resident elsewhere. Mr. Gaines-Cooper contended that, in
1976, he left the UK permanently or for at least
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