New Tax Law For Non-Profit Organisations In South Africa

Amanda Banks, Tax-news.com, London

02 April 2001

A new law - contained in the Taxation Laws Amendment Act 2000 - governing the taxation of nonprofit organisations in South Africa has been introduced to simplify the previous law concerning this type of taxation and to expand the range of tax benefits for such groups.

Nonprofit organisations are usually trusts, companies or associations created to promote the public's interest and are exempt from income, property and transfer taxes. They have been operating under a 1962 Act which provides for donors to deduct 'philanthropic' contributions for charities from their taxable income but there were restrictions imposed on the benefits of donors' contributions to all educational funds including college and university.

The amended law will create a new category of public benefit organisations and will require all nonprofit organisations to apply for tax exemption. Previously, some nonprofit groups were viewed as tax exempt whether or not they had applied for approval of their tax-exempt status. The new law stipulates that if a nonprofit group is defined as a 'public benefit' organisation it will become exempt from income tax if it meets certain conditions listed by the law.

They can also qualify for donor deductions if they perform public activities such as formal secondary and tertiary education, organisations involved in preventing HIV infection, providing homes for abandoned, abused or orphaned children and caring for the destitute elderly.

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