Due to a mismatch between South Africa’s domestic legislation and the rules of a DTA with Luxembourg, the taxpayer in the dispute, Tradehold Ltd (Tradehold), was able to shift its residency without paying SARS any exit tax.
Tradehold is an investment holding company listed on the Johannesburg Stock Exchange. In July 2002, Tradehold’s directors held a board meeting in Luxembourg. At this meeting, it was decided that all future board meetings would be held in Luxembourg, meaning the company’s effective place of management was transferred there from South Africa.
Under article 4(3) of the South Africa-Luxembourg DTA, the deemed place of residence of a company is the place where its effective management is situated.
However, although Tradehold became a Luxembourg resident in July 2002 under the terms of the DTA, South African domestic legislation at the time provided that Tradehold also remained a South African resident...
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