Tradehold - Supreme Court of Appeal of South Africa finds that an “alienation” for Treaty purposes includes a deemed disposal

A South African public company shifted its place of effective management to Luxembourg in 2002 (so that it became a Luxembourg resident for purposes of the Treaty with South Africa) but did not cease to be a South African resident for domestic purposes until 2003, when a domestic amendment provided that its Treaty status determined its residency status for domestic purposes.

This then triggered a deemed capital gain on its assets under the South African exit tax provisions, subject to the standard exemption in Art. 13(4) of the Treaty for "alienations" by a resident of Luxembourg of most types of property.

The Court rejected the South African Commissioner’s argument that "alienations" did not include deemed disposals (so that the company was not subject to the exit tax).  This is consistent with the interpretation elsewhere of "alienation" (e.g., 84 C.R. – Q. 40).

Neal Armstrong  Summary of Commissioner for South African Revenue Service v. Tradehold Limited, [2012] ZASCA 61 (Supreme Court of Appeal of South Africa) under Treaties - Art. 13.