Tax Treaty Case Law around the Globe 2019

S. 277South Africa: Where is Employment Exercised when the Employee Renders Services in a Third State

Tracy Johnson/Jennifer Roeleveld

S. 2781. Introduction

The Tax Court in Cape Town handed down its decision in the matter of X v Commissioner for the South African Revenue Service on 9 March 2018. This case represented the first opportunity for a South African court to consider where employment is exercised for tax treaty purposes. It was considered in the context of article 15(1) of the South Africa-United States Income Tax Treaty (1997) (South Africa-US tax treaty). The case also provided an opportunity to revisit the rudimentary source rules in relation to personal service income in South Africa. Unfortunately, the decision delivered by the Tax Court is generally considered to be incorrect.

2. Facts of the case

The taxpayer was an individual who was tax resident in the United States. He was employed by a South African branch of a US tax resident company, for a period of 245 days. The period of employment commenced on 1 March 2013 and terminated on 31 October 2013. During that period, his services were rendered within South Africa for an aggregate period of 183 days, and outside South Africa to cl...