Special rules apply with regard to the VAT treatment of rental pool schemes. For convenience and simplicity, in this Chapter – the words “owner” or “owners” are used to see owners and shareholders in sectional title schemes, time-sharing schemes and share block companies which participate in a rental pool scheme; the words “unit” or “units” are used to see the units or rights in fixed property which are applied in the rental pool scheme, and with which the enterprise is conducted by the operator; and the term “operator” is used to see the person that carries on the activities of the rental pool scheme as principal as contemplated in section 52(2).

What is a rental pool scheme?

Description of a rental pool scheme
The term “rental pool scheme” is not defined in the VAT Act, but may be described as an arrangement whereby the persons referred to in section 52(2) share resources and apply their combined interests or rights of use of fixed property for the purpose of conducting an enterprise47 for the benefit of the members of the rental pool. The persons referred to are – the owners of time-sharing interests in a property time-sharing scheme as defined in section 1 of the Property Timesharing Control Act No. 75 of 1983; the owners of sectional title interests in a sectional title scheme as defined in section 1 of the Sectional Title Act No. 95 of 1986; and the shareholders in a shareblock company as defined in section 1 of the Shareblocks Control Act No. 59 of 1980.

Once a rental pool scheme has been established, an operator must be appointed to carry on the enterprise activity of the rental pool. The operator could be anyone, for example – the time-share body corporate, sectional title body corporate or share block company; an estate agent; a person who specialises in time-share sales and renting of such units; an entity which has been created specifically for the purposes of conducting the rental pool activity; any other person appointed to carry on this activity.

Should a time-share body corporate, sectional title body corporate or share block company be appointed to carry out this task, it will be carrying on a dual function for the unit owners. See section 52(2).

For the purposes of this chapter, a rental pool scheme is discussed in the context of a commercial accommodation enterprise. However, the principles could apply equally to rental pools which, for example, rent out office space. VAT 409 – Guide for Fixed Property and Construction Chapter 8 concerned in that it will be collecting levies as well as managing the rental pool scheme. In any of these cases, the operator must register the rental pool separately for VAT. For example, if an estate agent is appointed as the operator, the rental pool must be registered as a separate branch of that estate agent’s business.

Functions of a rental pool

The operator may carry out the following functions:
• General property management and administration
• Collection of rentals
• Arranging of other specific services required by the pool members
• Payment of service charges on behalf of owners
• Ensuring that the units are cleaned and serviced
• Marketing, advertising and renting out of units

In addition to the above functions, the main purpose of section 52(2) is to create a situation where the operator is regarded as the principal and not the agent of the owners of the units. This allows the input tax and output tax to be accounted for by the operator under one VAT registration, instead of by each owner under a number of separate VAT registrations.

Participation in a rental pool

There are different ways in which a unit owner may participate in a rental pool, for example: The unit owner may be contractually obliged to apply the unit immediately in a rental pool scheme upon purchasing the unit from the developer. If the rental pool scheme is voluntary, a unit owner may have an option to apply the unit in an existing pooling arrangement at some time after purchasing the unit. Where there is initially no pooling arrangement at the time of purchase, a group of unit owners may decide at a later stage to create a rental pool scheme and to apply their units in the pool.

In any of these cases, the owners must elect in writing that the rental pool will be regarded as a separate enterprise from the owners and that it is treated as the principal for the purposes of supplying commercial accommodation. (See 2.9 for a discussion on commercial accommodation).


In order to understand the requirements for VAT registration of a rental pool scheme, the provisions of sections 52(2), 23 and 50 must be considered. In addition, the exemption in section 12(f) which applies in respect of levies must be considered, as the operator of a rental pool is often the body corporate or share block company of the building, or the managing agent which also collects levies on behalf of the body corporate or share block company. As mentioned in 8.2, this may lead to the performance of a dual function and the activities of the rental pool (taxable) should be kept separate from the activities of the levy fund (which is exempt if the development is not time-share).

Once the owners have provided the required declaration referred to in section 52, the rental pool scheme is deemed to be an enterprise which is operating separately from the owners and is regarded as a principal and not as an agent of the owners for VAT purposes. 60 VAT 409 – Guide for Fixed Property and Construction Chapter 8 The VAT registration implications of this are – that the operator must be regarded as a separate person from the owners participating in the rental pool; that if the operator is the body corporate or another person who is already registered for VAT, it will have to register the pool separately as a branch on a form VAT 102; and that the total amount earned from the use and application of all the units in the pool is deemed to be in respect of an enterprise carried on by the operator.