South Africa: Tax matters and challenges for private equity funds

South Africa: Tax matters for private equity funds

The most commonly used legal structure for private equity (PE) funds in South Africa is the “en commandite partnership” (ECP). An ECP does not have separate legal personality, and has two categories of partner:

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  • Those with unlimited liability as regards third parties (referred to as the fund’s general partner)
  • Those with limited liability (the fund’s investors or limited partners)

The identity of the limited partners (LPs) and their respective investment stakes in the fund and underlying portfolio companies is kept confidential in terms of the limited liability partnership agreement as between the fund manager, the general partner and other LPs.

PE funds can also be structured as bewind trusts, but this structure lacks flexibility in terms of ring-fencing the liability of investors, and is not a common vehicle globally. The accommodation of a variety of LPs, unlimited partners and PE managers is more challenging with a trust. In addition, specific tax rules are available for partnerships. 


Read a 2016 blog article prepared by the KPMG member firm in South Africa

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