SA Budget 2012 - Ernst & Young - South Africa

Local managers of foreign funds

A change to the permanent establishment definition was effected under the 2010 Taxation Laws Amendment Act when it was recognised for instance, that a local partner may create a permanent establishment for foreign investors that typically invest in South Africa through a foreign investment vehicle.   What remained a concern, is that a South African manager managing foreign investment funds regarding African fund assets, may create an effective management for that fund (hence it be seen as a resident, giving rise to a world wide basis of taxation).

It is proposed that a legislative carve-out be created for foreign investment funds so that these funds are not inadvertently subject to worldwide taxation.