CAPE TOWN: The South African Revenue Service (SARS) has issued a draft interpretation note that focuses on “conduit public benefit organizations (PBOs)” providing funds that are used to carry out tax-exempt public benefit activities (PBAs) in the country.
In South Africa, an organization that has a non-profit motive does not automatically qualify for preferential tax treatment. It will only enjoy exemption from normal tax for its PBAs after it has applied for PBO status and been granted approval by SARS.
A PBO can either carry out PBAs itself or provide funds or assets to another PBO; any institution, board, or body that conducts one or more PBA; an association of persons carrying on one or more PBA; or a department in national, provincial, or local government. A PBO that provides funds or assets to others is generally referred to as a “conduit PBO.”
In this context, it is provided that an “association of persons” is a voluntary informal association or group of persons that carries out one or more PBAs. Such an association or group of individuals will not itself qualify for approval as a PBO because it does not have a founding document.
