Author: Ben Strauss (Cliff Dekker Hofmeyer) Fiscal policy, as manifested in the Income Tax Act, No 58 of 1962 (Act), is that philanthropy should be encouraged. The Act achieves this objective by providing that, subject to certain criteria being met and subject to limitations, charitable organisations enjoy a very favourable tax regime and taxpayers who make donations to such organisations may deduct the donations for income tax purposes. To qualify for the favourable dispensation, an organisation must be approved as a public benefit organisation (PBO) by the South African Revenue Service (SARS).
Author: Prof Daniel Erasmus (TRM Services) A public benefit organisation (“PBO”) is a nonprofit company with members that includes the following objects as set out in its Memorandum of Incorporation: “… to develop technology and materials in support of such objectives…”. The PBO wants to enter into a Joint Venture arrangement with a company (“the Company”) that is able to contribute the skills and expertise “… to develop technology and materials in support of such objectives…”. But it only wants to do so if there are no adverse value-added tax (“VAT”) consequences.
In South Africa, 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 Public Benefit Organisation (PBO).