CAPE TOWN: The South African Revenue Service (SARS) has issued a revised version of its tax exemption guide, which is intended to assist non-profit organizations (NPOs) that qualify for approval as public benefit organizations (PBOs) in South Africa.
The guide covers the exemptions from taxes that may affect PBOs, including income tax, donations tax, estate duty, transfer duty, dividends tax, securities transfer tax, the skills development levy, capital gains tax, value added tax and employees’ tax.
It is confirmed that an organization will only enjoy preferential tax treatment after it has applied for and been granted approval as a PBO conducting an approved “public benefit activity” (PBA) by SARS’ Tax Exemption Unit, and as long as it continues to comply with the relevant requirements and conditions as set out in the NPO Act.
It is firstly noted that, while “tax benefits are designed to assist NPOs by augmenting their financial resources and providing them with an enabling environment in which to achieve their objectives,” the fact that an organization has a non-profit motive, or is registered as an NPO under the Non-Profit Organizations Act 71 of 1997 (or is set up as a non-profit company under the Companies Act), does not mean that it automatically qualifies for preferential tax treatment or approval as a PBO.
Those requirements and conditions include the submission of annual income tax returns to the TEU, which assesses whether an approved PBO is operating within the prescribed limits of the relevant approval granted, and determines whether the “partial taxation principle” must be applied to receipts and accruals derived from a trading activity or business undertaking which does not qualify for exemption.
As a further tax break, a taxpayer making bona fide donations in cash or of property in kind to a PBO is entitled to a deduction from taxable income if the donations are supported by the necessary receipt issued by the organization or, in certain circumstances, by an employees’ tax certificate reflecting donations made by an employee.
