Changes To The Definition Of "Resident" Affecting CFCs And SA Fund Managers

Two new changes have been proposed in the draft Taxation Laws Amendment Bill, 2012 (Bill) in relation to the definition of the term 'resident' in section 1 of the Income Tax Act, No 58 of 1962 ('the Act').  The changes are aimed at, amongst others, facilitating the Government's initiative to establish South Africa as the gateway into Africa by eliminating the potential triggering of a dual residence status for a foreign operating subsidiary and thus, triggering potential double taxation of that entity and allowing South African based fund managers of foreign investment funds to operate competitively in the international investment business.
 
The first change is directed at excluding from the definition of the term "resident", active controlled foreign companies ('CFCs') in high-tax jurisdictions that are effectively managed in South Africa.  The second change is directed at providing relief to foreign investment funds which are effectively managed in South Africa.