South Africa: New tax legislation and exchange control case

International Tax Review is part of Legal Benchmarking Limited, 1-2 Paris Garden, London, SE1 8ND

Copyright © Legal Benchmarking Limited and its affiliated companies 2026

Accessibility | Terms of Use | Privacy Policy | Modern Slavery Statement

South Africa: New tax legislation and exchange control case

dachs.jpg

Peter Dachs

South Africa's new double tax agreement (DTA) with Mauritius was published in the Government Gazette of June 17 2015. In terms of article 28 of the new DTA, the provisions thereof shall only be effective in both countries from January 1 2016. The main changes introduced by the new DTA relate to dual residence for persons other than individuals, withholding taxes (dividends, interest and royalties) and capital gains.

Article 4 of the new DTA provides that if a person other than an individual is a resident of both South Africa and Mauritius, then the competent authorities of both contracting states shall by mutual agreement endeavour to settle the question of residency. In this regard, South Africa and Mauritius entered into a memorandum of understanding (MoU) on May 22 2015, which entered into force from May 28 2015, in terms of which both countries agreed the factors that shall be considered by the relevant competent authorities upon making such a determination.

A recent case heard by the Constitutional Court dealt with the constitutional validity of an exit charge levied by the South African Reserve Bank on the transfer of funds offshore from an emigrant's blocked account.

In 2014 the Supreme Court of Appeal found in favour of the appellant, Mark Shuttleworth, that the imposition of the 10% exit charge was invalid since the charge constituted a tax and should have been passed by Parliament as a money Bill in terms of section 77 of the Constitution. The South African Reserve Bank then took the matter on appeal to the Constitutional Court.

The Constitutional Court overturned the decision of the Supreme Court of Appeal. A majority of the Court found that the charge was not a revenue-raising mechanism which was required to be passed as a money Bill, but rather a regulatory charge. In coming to this decision the majority recognised that there is not always a clear distinction between a revenue-raising mechanism and a regulatory charge. A regulatory charge always generates revenue and a tax always has some regulatory effect. It is necessary, the majority found, to look at the dominant purpose of the charge.

Peter Dachs (pdachs@ensafrica.com)

ENSafrica – Taxand Africa

Tel: +27 21 410 2500

Website: www.ensafrica.com

more across site & shared bottom lb ros

More from across our site

The UK tax authority’s deputy director of large business also reassured taxpayers that HMRC will not ‘nitpick’ returns
Sucafina’s tax chief was speaking at the ITR Pillar 2 Forum in London alongside experts from HMRC and other organisations
India’s Supreme Court rattled cross‑border structuring with its Tiger Global ruling. Subsequent rule changes narrowed the impact, but significant risks around GAAR, substance and treaty access persist
The UK-based big four spin-off firm has hired Marc Lien, who declared that most AI in professional services today is ‘cosmetic’
Projected revenue losses and exemption requests are harming the project’s capability and viability
HMRC secured lengthy prison sentences in a major payroll VAT fraud case, while law firms announced tax promotions and hires
Significant changes include an update to profit markers and an alteration to how an ‘inbound distributor’ is defined
ITR sat down for a pre-event interview with Tim Zech, WTS Germany, and Jeff Soar, WTS UK, keynote speaker at next week’s ITR AI in Tax Forum 2026 in London
Brazil’s bid to seek US-style exemptions from pillar two is ‘highly advantageous’ for multinationals, ITR has also heard
India is signalling flexibility on expat taxation to attract foreign expertise, though employers will need to navigate disclosure, treaty and scope uncertainties
Gift this article