Page 183 - SAIT Compendium 2016 Volume2

IN 3 Income Tax acT: InTeRPReTaTIon noTes IN 3
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that ordinarily resident is narrower than resident. A person is ordinarily resident where he/she normally resides, apart from temporary/occasional absences (CIR v Kuttel (supra)).
In ITC 1170 (34 SATC 76) it was pointed out by the court that the question whether a taxpayer may be regarded as being ‘ordinarily resident’ at a particular place during a particular period is one of degree, and one is entitled to look at the taxpayer’s mode of life beyond the particular period under consideration.
The case of Robinson v COT 1917 TPD 542, 32 SATC 41 deals with the interpretation of the word ‘residence’ only and not the term ‘ordinarily resident’. The case is important, though, because it focuses on the physical presence of the taxpayer and his maintenance of a home as the crucial tests to be applied in the determination of his residence.
In ITC 961 (1061) 24 SATC 648 it was held that a woman who marries a man ordinarily resident in a particular country and sets up home with her husband in that country cannot be said to be ordinarily resident in some other country, even if immediately before her marriage she was ordinarily resident in that other country.
3. Application of the law
The question whether a person is ordinarily resident in a country is one of fact and each case must be decided on its own facts having regard to principles already established by case law, meanings expressed in the text books, etc. It is not possible to lay down hard and fast rules. The concept must also not be confused with the terms ‘domicile’, ‘nationality’ and the concept of emigrating or immigrating for exchange control purposes.
A physical presence at all times is not a requisite to be ordinarily resident in the Republic. The following two requirements need to be present:
• an intention to become ordinarily resident in a country; and
• steps indicative of this intention having been or being carried out.
A person’s mode of life may be such that it cannot be said that he or she has a real home anywhere. A common feature of multinational corporations is that certain staff is [sic] virtually permanent wanderers. In such a case the burden would be on the taxpayer to discharge the onus that he/she is not ordinarily resident in the Republic. It is not possible to lay down any clearly de ned rule or period to determine ordinarily [sic] residence.
The effect of the above is that a natural person may be resident in South Africa even if that person was not physically present in South Africa during the relevant year of assessment. The purpose, nature and intention of the taxpayer’s absence must be established to determine whether the taxpayer is still ordinarily resident. The following factors will be relevant in considering the above two requirements:
• most xed and settled place of residence
• habitual abode, i.e. present habits and mode of life
• place of business and personal interest
• status of individual in country, i.e. immigrant, work permit periods and conditions, etc
• location of personal belongings
• nationality
• family and social relations (schools, church, etc)
• political, cultural or other activities
• application for permanent residence
• period abroad; purpose and nature of visits
• frequency of and reasons of visits
The above list is not intended to be exhaustive or speci c, merely a guideline.
The circumstances of the person must be examined as a whole, and the personal acts of the individual must
receive special attention. As stated in ITC 1170, one is entitled to look at the taxpayer’s mode of life beyond the particular period under consideration. It is not possible to specify over what period the comparison must be made. The comparison must cover a suf cient period for it to be possible to determine whether the person is ordinarily resident in South Africa.
A natural person, who became ordinarily resident, will become a resident as from a speci c date. That date will be the date on which he or she became ordinarily resident in the Republic. It, therefore, follows that a natural person will not be taxable in the Republic on any income earned outside the Republic prior to the date on which he or she became ordinarily resident in the Republic, unless it was deemed to be of a South African source and was therefore taxable in terms of paragraph (ii) of the de nition of ‘gross income’ in section one of the Act.
Example:
Mr. X became ordinarily resident in the Republic on 1 October 2001. All income received by or accrued to Mr. X from a source outside the Republic prior to 1 October 2001 will be excluded from his income for the year of assessment ending 28 February 2002. All income (worldwide) received by or accrued to Mr. X, on or after 1 October 2001 (excluding certain income that may be exempt) will be included in his taxable income for the year of assessment ending 28 February 2002.
A natural person, who emigrates from the Republic to another country, will cease to be a resident as from the date that he or she emigrates.
Example:
Ms. A, emigrated to Zambia on 29 October 2001 and married a Zambian resident. She has no business or nancial connection in the Republic and does not intend to return to the Republic. In these circumstances Ms. A ceased to be a resident on 29 October 2001.
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