Abstract
Non-residents operating outside their home jurisdiction present an interesting dynamic for governments in ensuring that their revenue authorities receive their fair share of taxes from the non-residents operating within their jurisdictions, while at the same time, ensuring that they remain investor-friendly (Croome, 2015). When a non-resident provides services within the Republic of South Africa, it is critical for that non-resident to assess whether, as a consequence of providing such services, the non-resident will be subject to South African income tax (Louw, 2016; Croome, 2015). Further to this, it is necessary for a foreign entity to determine whether it would create a ‘permanent establishment’ in South Africa as a result of the provision of such services (Croome, 2015). Generally, non-residents are subject to South African income tax on income that is obtained from a ‘source’ within the country or attributable to a ‘permanent establishment’ in the Republic in terms of South African income tax law (read together with a DTA, where South Africa has a double tax agreement with the home country of the non-resident) (Louw, 2016). However, South Africa does not have specific source rules that address the determination of the source of the services provided by non-residents, thus taxpayers are reliant on case law to determine the ‘source’ of such services. The case law principles have not been tested in relation to digital and online services. Adding to this complexity, is the fact that South Africa applies the OECD definition of ‘permanent establishment’ (Vosloo, nd). The definition is reliant on a non-resident having a physical presence in the source country. This is inefficient for taxing online service providers that may not have a ‘physical presence’ in a country (EU Commission, 2017)...
M.Com. (South African and International Taxation)