Place of effective management
SARS has issued for comment by 31 July 2015 an updated interpretation note relating to the residency and place of effective management for companies.
The current Interpretation Note indicates that it is necessary to determine where the company is managed on a regular or day-to-day basis by the directors or senior managers of the company, irrespective of where the overriding control is exercised, or where the board of directors meets.
In the revised draft Interpretation Note, it is stated that a company’s place of effective management is the place where key management and commercial decisions that are necessary for the conduct of its business as a whole are in substance made. This approach is consistent with that adopted by the Organisation for Economic Co-operation and Development.
It is clear from the wording of the draft Interpretation Note that there is greater emphasis placed on the need for a company to demonstrate that it has substance to its presence in any jurisdiction. Without such substance, the test for residency will not be satisfied.