n Business Tax and Company Law Quarterly - Partnerships / joint ventures and VAT - the knights and the dragons are confused

Volume 3, Issue 4
  • ISSN : 2219-1585


The tax treatment of joint venture arrangements is problematic, not only from a VAT perspective, but also from an income tax perspective. However, in some respects the income tax treatment is less problematic in that the Income Tax Act 58 of 1962 does not seek to create a separate taxable entity, but in essence treats a joint venture as fiscally transparent. By contrast, the Value-Added Tax Act 89 of 1991 deems the joint venture to be a separate person (and accordingly a separate vendor) for VAT purposes if the joint venture can be said to constitute a 'body of persons, whether corporate or unincorporate (other than a company)' and such body of persons carries on an enterprise.

However, this seemingly simple provision can itself give rise to numerous interpretational issues. The first, and most important, being: when does a 'body of persons, corporate or unincorporate' come into existence? The premise of this article is that, under our common law, to constitute an unincorporated body of persons the body must constitute a universitas - which requires the ability to contract in its own name and have perpetual succession. It is apparent that many commercial joint ventures would not qualify should these requirements in fact be necessary.
Once one has established that the parties to a joint venture arrangement have in fact created a separate qualifying unincorporated body of persons, the next issue is to determine how transactions between the body of persons and its members are to be dealt with from a VAT perspective. The article questions whether SARS is correct in its view that a supply of goods by members to a joint venture that is regarded as a separate body of persons can be said to be made for no consideration, merely because the members will only derive profits and no specific consideration.
Finally, the article raises the possibility that the joint venture arrangement could in fact merely create an agency relationship, and explains how this will be dealt with from a VAT perspective.

Loading full text...

Full text loading...


Article metrics loading...


This is a required field
Please enter a valid email address
Approval was a Success
Invalid data
An Error Occurred
Approval was partially successful, following selected items could not be processed due to error