South Africa has strict exchange control rules and the participation of foreign parties in the joint venture would be subject to them. Generally speaking, exchange control rules require permission from South African exchange control authorities to bring money or goods into South Africa (whether through loans, share issues or partner contributions) and to take money from South Africa (whether by dividend, distribution or sale of the joint venture`s holding). Foreign joint ventures may be taxed differently in South Africa than their South African counterparts. Contributions and distributions to partners under a partnership agreement are generally governed by the partnership agreement. Another important reflection in South Africa in structuring joint ventures is the strengthening of the black economy. There may be some cases where a joint venture should be structured with a specific stake, considered a black stake within the meaning of the large-scale measures in place in South Africa to strengthen the black economy. In addition, there may be certain requirements for directors of the board of directors or management of the company who qualify for Black Economic Empowerment measures (see question 31). (2) Diversify the risk With a joint venture agreement, you share the risks of resuming a tender with one or more of the company`s partners. You can cover part of the entry costs and you can limit the agreement to a specific offer/contract/period. The most common governance issues related to joint ventures relate to the division between the day-to-day operation of the business and the overall oversight of day-to-day operations. Whether the joint venture is managed through an undertaking or a partnership, there is usually a works council or management committee responsible for the day-to-day operation of the partnership or undertaking. This body would have a kind of delegated power to make certain decisions on behalf of the company or partners.
As a general rule, there would be supervision of such a works council or management committee, either by the board of directors or by the partners themselves. In the case of a company, certain decisions may also be reserved for the decision-making of the company`s shareholders. See also the debate on black economic empowerment in question 31. As a general rule, the creation of a joint venture as a business or partnership does not entail tax costs. Where the joint venture is incorporated as a business, the company is usually the taxable unit and there will only be a tax on distributions to shareholders. In the case of a partnership and because a partnership is not defined as a person for normal tax purposes, it is not a taxable entity. However, for other purposes (e.g. B VAT), the partnership is considered a person, but only for these purposes. Since a partnership is not an taxable entity and its partners are liable for the normal tax on their share of the benefit of the partnership, the income received by a partnership is considered to be received individually by the partners on the same day as the partnership received the book. in accordance with their profit-bearing shares, as defined in the social contract.
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