An organisation that has a non-profit motive or is established or registered as a non-profit organisation does not automatically qualify for preferential tax treatment. An organisation will only enjoy preferential tax treatment after it has applied for and been granted approval as a PBO by the TEU. Once approved the PBO must continue to comply with the Act and related legislation throughout its existence.
Approved PBOs have the privilege and responsibility of spending public funds, which they derive from donations or grants, in the public interest on a tax-free basis. The donations or grants may be received from the general public or directly or indirectly from the State. It is therefore important to ensure that exempt organisations use their funds responsibly and solely for their stated objectives, without any personal gain being enjoyed by any person including the founders and the fiduciaries.
The conditions and requirements for an organisation to be approved as a PBO are contained in section 30 while the rules governing the preferential tax treatment of PBOs are contained in section 10(1)(cN). Section 10(1)(cN) provides for the exemption from normal tax of certain receipts and accruals of approved PBOs. Certain receipts and accruals from trading or business activities will nevertheless be taxable.
This guide has been prepared to assist non-profit organisations in South Africa to understand the basic implications relating to PBOs with particular reference to income tax.
The eligibility to issue valid receipts for tax-deductible donations under section 18A and other tax issues affecting PBOs such as capital gains tax, estate duty, securities transfer tax, transfer duty, customs duty, skills development levy and value-added tax are not discussed in this guide.
Download full basic guide from links below, 17 pages.