The Headquarter Company Structure in the Southern African Context: a South African Tax Law Perspective

Abstract

The introduction of the headquarter company structure in the South African Income Tax Act as a means to allow South Africa to be used as a regional gateway, requires a comparison with other resident South African companies involved in intra-African trade and investment. It also requires a comparison with non-resident companies using South Africa purely as a management base for their intra-African trade and investment. The comparison must take into account the effect of the structure on the income flows, the transfer of funds, the administrative burden, and collectively, the effect on the tax liabilities of the various company structures. In addition the tax policy concepts of neutrality and the South African constitutional requirement of ‘equality’ should be considered. Taken collectively, the analysis illustrates that the headquarter company structure as provided for in the tax legislation, does not meet the objective of the use of South Africa as the gateway into Africa. Neither is the differential treatment satisfactorily justified.