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SARS Issues Guides On Tax-Deductible Donations, PBOs

by Lorys Charalambous,, Cyprus

22 September 2016

The South African Revenue Service (SARS) has issued two basic guides for the tax-exempt sector, on tax-deductible donations, and on the income tax exemption for a public benefit organization (PBO) carrying on a public benefit activity (PBA).

SARS explained that the first 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 PBAs in South Africa; and conduit PBOs if they provide funds or assets to another PBO or institution, which are in turn required to use the funds or assets in carrying on PBAs in South Africa.

PBAs for Section 18A purposes are categorized as welfare and humanitarian; health care; education and development; conservation, environment and animal welfare; and land and housing.

In the second guide, it is re-emphasized that the mere fact that an organization has a non-profit motive, or is established or registered as an non-profit organization (NPO) under the NPO Act or 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.

An organization will enjoy preferential tax treatment only after it has applied for and been granted approval as a PBO by SARS, and continues to comply with the relevant prescribed requirements.

TAGS: South Africa | compliance | tax | business | tax compliance | revenue guidance | tax authority | tax breaks | charities | Africa | Tax

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