Page 379 - SAIT Compendium 2016 Volume2

IN 25 (3) Income Tax acT: InTeRPReTaTIon noTes IN 25 (3)
Example 3 – Insolvency
Facts:
Z, a resident of Utopia (with which South Africa does not have an agreement for the avoidance of double taxation) is ordinarily resident in the Republic. Z was physically present in the Republic for the following periods:
a) 12 April 2013 to 25 June 2013.
b) 31 July 2013 to 16 September 2013.
c) 15 December 2013 to 15 March 2014.
On 2 September 2013 the court issued a provisional order placing Z’s estate in sequestration. This order was later made nal. As a result of the provisional order of sequestration issued on 2 September 2013, Z will have two periods of assessment, namely:
• First period of assessment – Period before insolvency
The period of assessment commenced on 1 March 2013 and ended on 1 September 2013, the day before the order of sequestration was issued.
• Second period of assessment – Period from insolvency
The period of assessment commenced on 2 September 2013 (the day on which the provisional order of sequestration was issued) and ended on the last day of February 2014.
During the ve preceding years of assessment, Z was physically present in the Republic for the following number of
days:
Year of assessment
2009
2010
2011
2012
2013
Number of days
110
335
185
181
117
928
Result:
Period of assessment before insolvency (1 March 2013 – 1 September 2013)
Z was physically present in the Republic during the rst period of assessment (1 March 2013 to 1 September 2013), as follows:
Period
12 April 2013 to 25 June 2013
31 July 2013 to 1 September 2013 Number of days in aggregate
Number of days
75
31 106
Z was resident in the Republic during the rst period assessment because of the physical presence in the Republic for – • more than 91 days in total during the current year (or period) of assessment;
• more than 91 days in total in each of the ve years of assessment immediately preceding the current year of
assessment; and
• more than 915 days in total during those ve immediately preceding years of assessment.
Period of assessment from insolvency (2 September 2013 – 28 February 2014)
Z was physically present in the Republic during the second period of assessment (2 September 2013 – 28 February 2014), as follows:
Period
2 September 2013 to 16 September 2013 15 December 2013 to 28 February 2014 Number of days in aggregate
Number of days
15 76 91
Z does not meet the rst requirement of the physical presence test during the second period (from insolvency) because Z is not physically present for a period exceeding 91 days in aggregate during that period of assessment. The second period is treated as a new year of assessment, and the ‘current year of assessment’ for purposes of the physical presence test. The 106 days that Z was present in South Africa during the rst period of assessment is considered as one of the ve previous years of assessment for purposes of the second and third requirements of the physical presence test.
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