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If your business is a partnership make sure you understand how your Vat liability works

by , 31 March 2015
If your business a partnership, there are several important Vat consequences you need to know about.

Down below you'll find what more about the Vat liabilities in a partnership. These don't apply in every situation so here's your chance to know if you fall into one of these categories.

Partnerships and Vat liabilities – what you need to know

We've already mentioned that there are certain liabilities in a partnership when it comes to Vat. But you have to know that these apply to the members of a partnership performing any obligations under the Vat Act.

In this case, the liabilities are:

• Individually and jointly;
• Performing all duties as a vendor; and
• Paying the full amount of Vat due by the partnership (Section 51(3) of the Vat Act).

In other words, this means the Vat liabilities in a partnership will affect you as one of the partners in the partnership. SARS holds partners jointly liable for the partnership debts.

Let us give you a short example to explain how this works.

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Partnerships and Vat: How it works in real life

Let's say you're in a partnership with three others and your partnership doesn't pay the Vat you owe SARS. If the other three partners disappear, you're liable to pay all the Vat!

But pay attention to the fact that this liability doesn't apply to partners 'en commandite'.

This stipulation applies to

• Partners whose names aren't enclosed (silent partners); or
• Special partners who haven't held themselves out as general partners. These are people who just contributed money towards the partnership but you generally don't see them as partners.

There you go. Now you know how Vat affects you when it comes to partnership.

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