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The South African Revenue Service (SARS) has issued a tax exemption guide on the income tax exemption for a public benefit organization (PBO) carrying on a public benefit activity (PBA).
SARS explained that the guide has been prepared to assist PBOs in understanding the basic requirements for obtaining and retaining approval under Section 18A of the South African Income Tax Act to issue donation receipts that entitle the donor to a tax deduction for bona fide donations made.
The eligibility to issue Section 18A receipts is restricted to PBOs approved by SARS to use the donations to fund specific PBAs. Such a receipt can be issued by an approved organization only from the date that the SARS Tax Exemption Unit has confirmed that the organization qualifies for Section 18A approval and has issued it with a reference number.
The organizations that may qualify for approval under Section 18A, subject to certain conditions and requirements, include PBOs, if they physically and actively carry on one or more PBAs in South Africa. The sole or principle object of a PBO may not be to conduct a commercial business activity in order to use the profits so derived to fund a PBA.
PBAs for Section 18A purposes are categorized as welfare and humanitarian; health care; education and development; religion, cultural, conservation and environment, sport, and animal welfare; and land and housing.
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