Tax Treaty Case Law around the Globe 2016

S. 51Chapter 4 South Africa: Is an Exit Levy a Tax?

Jennifer Roeleveld and Craig West

4.1. Introduction

Exchange control legislation has been in place in South Africa since 1933 and was designed to control and restrict the export of capital. The legislation has been amended over the years to relax the restrictions and allow the export of capital within certain parameters and levy exit charges where appropriate.

The validity of such an exit charge was challenged in the Supreme Court of Appeal in Shuttleworth v. South African Reserve Bank (864/2013) [2014] ZASCA 2, where it was unanimously decided that the exit charge was a tax and therefore unconstitutional. An appeal to the Constitutional Court led to a split decision with the majority ruling that if the dominant purpose of the charge is to obtain revenue for the state, then the charge amounts to a tax. If the dominant purpose is to regulate behaviour, the true purpose being the regulation of the export of capital in this case, and the raising of revenue is merely a “by-product” of the charge, then it is not a tax.

4.2. Facts of the case

In terms of section 9(1) of the Currency and Exchanges Act (hereinafter 1933 Act), the President is empow...