Abstract:
Determining the residence of a taxpayer is one of the most important
aspects of modern tax systems. For an individual taxpayer who migrates,
a common trend in the modern world, the questions are where the
person is ordinarily resident and whether the place of ordinary residence
can change. The two key cases in South African jurisprudence that are
cited whenever the question of residence or ordinary residence is raised
are Cohen v CIR and CIR v Kuttel. These cases form the foundation of this
article as they examine the meaning of “resident” and “ordinary” resident”
in the modern milieu. The article provides the historical background to
these two seminal cases, extracts the key principles handed down in
each of the judgments and evaluates these principles against definitions
of “resident” used in other countries with a view to evaluating whether
the definition of “resident” for South African tax purposes, premised
on the fundamental principles from these two historic cases, is still
relevant and appropriate. The article queries whether the concept of
“ordinary resident”, with its connotation of permanence, should be
updated to reflect the modern reality of transience and mobility. The
conclusion reached is that the existing definition of “resident” may be in
need of updating to accommodate global trends and to bring the South
African tax legislation more in line with modern developments and the
introduction of an objective test could provide more certainty to both
taxpayers and the fiscus, but this benefit should be weighed against the
possible cost of a loss to the tax base.
