Double taxation could arise in a situation where resident- resident conflicts occur. Resident–resident conflicts occur in the situation where both countries regard such a person as a “resident” for tax purposes under their domestic legislation. For that reason, all income that is earned by that person, irrespective of the jurisdiction it is earned in, will be subject to tax in both countries. In order to resolve these conflicts, the Organisation for Economic Cooperation and Development’s (“OECD’s”) Model Tax Convention contains a tie breaker clause which states that a non-individual shall be deemed to be a resident only of the State in which the ‘place of effective management’ is situated. It was found that although there were conflicting views, the expression ‘place of effective management’ was mainly determined with reference to the place where real management actually makes decisions on key business affairs of the company. Based on the following reasons it was concluded that using ‘place of effective management’ as a tie breaker rule was ineffective. • With improved communication technology and increased mobility of top level management, it makes it very difficult to pinpoint a single location where the ‘place of effective management’ is positioned; • Changes to the generic managerial structures seen in the past, makes it increasingly complex to determine where the ‘place of effective management’ is situated; and • There is no universal interpretation of the term ‘place of effective management’ within the international arena. Against the backdrop that each option for determining the ‘place of effective management, analysed in Chapter 4 had its own flaws, it is almost impossible to determine a company’s residency based on a single test. It was therefore, recommended that the tie breaker rule consist of a hierarchy of the following tests. 1. Deemed to be resident of the country in which place of effective management is situated, as defined by SARS’ interpretation. 2. Deemed to be a resident of the country in which its economic nexus is the strongest. 3. Conflict to be resolved by mutual agreement between the two Contracting States. / Thesis (M.Com. (Tax))--North-West University, Potchefstroom Campus, 2011.

Double taxation could arise in a situation where resident- resident conflicts occur. Resident–resident conflicts occur in the situation where both countries regard such a person as a “resident” for tax purposes under their domestic legislation. For that reason, all income that is earned by that person, irrespective of the jurisdiction it is earned in, will be subject to tax in both countries. In order to resolve these conflicts, the Organisation for Economic Cooperation and Development’s (“OECD’s”) Model Tax Convention contains a tie breaker clause which states that a non-individual shall be deemed to be a resident only of the State in which the ‘place of effective management’ is situated. It was found that although there were conflicting views, the expression ‘place of effective management’ was mainly determined with reference to the place where real management actually makes decisions on key business affairs of the company. Based on the following reasons it was concluded that using ‘place of effective management’ as a tie breaker rule was ineffective. • With improved communication technology and increased mobility of top level management, it makes it very difficult to pinpoint a single location where the ‘place of effective management’ is positioned; • Changes to the generic managerial structures seen in the past, makes it increasingly complex to determine where the ‘place of effective management’ is situated; and • There is no universal interpretation of the term ‘place of effective management’ within the international arena. Against the backdrop that each option for determining the ‘place of effective management, analysed in Chapter 4 had its own flaws, it is almost impossible to determine a company’s residency based on a single test. It was therefore, recommended that the tie breaker rule consist of a hierarchy of the following tests. 1. Deemed to be resident of the country in which place of effective management is situated, as defined by SARS’ interpretation. 2. Deemed to be a resident of the country in which its economic nexus is the strongest. 3. Conflict to be resolved by mutual agreement between the two Contracting States. / Thesis (M.Com. (Tax))--North-West University, Potchefstroom Campus, 2011.