http://www.polity.org.za
Deepening Democracy through Access to Information
Home / Press Office / Other Briefs RSS ← Back
Revenue Service|Technology|Tshwane University Of Technology|Service|Baker McKenzie Johannesburg|Van Der Walt
Technology||Service|
revenue-service|technology|tshwane-university-of-technology-facility|service|baker-mckenzie-johannesburg-person|van-der-walt
Close

Email this article

separate emails by commas, maximum limit of 4 addresses

Verification Image. Please refresh the page if you cannot see this image.

Sponsored by

Close

Article Enquiry

A University Has "No Body to Kick and No Soul to Damn"

Verification Image. Please refresh the page if you cannot see this image.
Close

Embed Video

A University Has "No Body to Kick and No Soul to Damn"

26th September 2018

SAVE THIS ARTICLE      EMAIL THIS ARTICLE

Font size: -+

In a recent reported judgment, the Commissioner for the South African Revenue Service v Respublica (Pty) Ltd (1025/2017) [2018] ZASCA 109 (12 September 2018), the Supreme Court of Appeal (SCA) had to decide whether a company can provide 'lodging' to a university.

In this case Respublica (Pty) Ltd (Respublica) entered into a lease agreement, as the lessor, with Tshwane University of Technology (TUT), as lessee. The lease agreement expressly provided that the premises were let to TUT for the sole purpose of allowing it to offer student accommodation to its students. Respublica contended that its supply to TUT qualified as "commercial accommodation", as defined in section 1(1) of the Value-Added Tax Act, No. 89 of 1991, as amended (VAT Act). Respublica argued that the accommodation supplied by it to TUT was used by the students who were, veritably, the 'lodgers'.

Advertisement

Respublica pursued its argument all the way to the SCA in order to benefit from concessionary value-added tax (VAT) treatment that the VAT Act offers to suppliers of commercial accommodation; more specifically, Respublica sought to have only 60%  of the value of its supply to TUT to be subject to VAT. The VAT Act provides that if Respublica was an enterprise supplying commercial accommodation for an unbroken period exceeding 28 days, the consideration in money for the supply of the commercial accommodation is deemed to be 60% of the all-inclusive charge. In other words, in this case, if the SCA held that the supply by Respublica to TUT constituted supply of commercial accommodation, only 60% of the value of its supply to TUT would be subject to VAT.

The Act defines "commercial accommodation" as "lodging or board and lodging …" and the consequence was that the SCA was called upon to decide whether Respublica can be said to have provided lodging to TUT. In its judgment, the SCA kept it quite simple and relied on the dictionary meaning of "lodging", which is defined as "a temporary place of residence" or "a temporary residence; sleeping accommodation", as well as "lodger", which is defined as "a person who pays rent in return for accommodation in someone's house".

Advertisement

The SCA then concluded that on the ordinary meaning of the word, a 'lodger' is a natural person who actually takes up temporary accommodation. Consequently, lodging cannot be provided to a juristic person, i.e. a university, that has "no body to kick and no soul to damn". The Court also held that, in addition to a juristic person only having a legal and fictional persona, there existed two distinct sets of agreements, the first between Respublica and TUT and, the second, between TUT and each respective student. The Court was emphatic that each set must be distinguished since each constituted a distinct "supply of goods" in terms of the VAT Act.

In conclusion, lessors must not structure their lease agreements on the incorrect assumption that if a lease agreement provides for obligatory subleasing of immovable property for a specific purpose, which subleasing constitutes supply of commercial accommodation, that, by reason thereof, such supply in terms of such lease agreement would also qualify as supply of commercial accommodation for the purposes of the VAT Act. An alternative must be sought and is available to lessors.

Written By JJ van der Walt, Candidate Attorney, overseen by Arnaaz Camay, Tax Executive, Baker McKenzie Johannesburg.

EMAIL THIS ARTICLE      SAVE THIS ARTICLE ARTICLE ENQUIRY

To subscribe email subscriptions@creamermedia.co.za or click here
To advertise email advertising@creamermedia.co.za or click here

Comment Guidelines

About

Polity.org.za is a product of Creamer Media.
www.creamermedia.co.za

Other Creamer Media Products include:
Engineering News
Mining Weekly
Research Channel Africa

Read more

Subscriptions

We offer a variety of subscriptions to our Magazine, Website, PDF Reports and our photo library.

Subscriptions are available via the Creamer Media Store.

View store

Advertise

Advertising on Polity.org.za is an effective way to build and consolidate a company's profile among clients and prospective clients. Email advertising@creamermedia.co.za

View options
Free daily email newsletter Register Now
Register Close