Section 8(25) of the VAT Act currently provides VAT relief in respect of assets disposed of using the corporate restructuring rules. National Treasury has recognised the fact that unincorporated entities, such as joint ventures and partnerships, are not recognised as taxpayers for income tax purposes, but are recognised as VAT vendors. Amendments are therefore proposed to address these anomalies and allow for reorganisation VAT relief for all vendors.

This principle is sound, but it needs to be recognised that for income tax purposes, restructurings are only permitted between certain types of closely held legal entities – mostly corporates.  As such, amendments may be needed to both the income tax legislation and the VAT legislation in order to fully address this proposal.